INVESTMENT HIGHLIGHTS

• Dialog Group Bhd’s 2QFY18 reported earnings grew by +26.7%yoy to RM115.8m

• 6MFY18 normalised earnings within expectations

• Tank farm business expanded by +31.6%yoy to RM66m

• Maintain NEUTRAL (upside bias) with revised TP of RM2.55 per share

Continuous earnings growth recorded. Dialog’s 2QFY18 earnings grew by +26.7%yoy to RM115.8m. Its cumulative 6MFY18 normalised earnings (excluding fair value gain on disposal and other non-cash items) which amounted to RM203.4m (+17.7%yoy) kept pace with our and consensus expectations, accounting for 46% and 50% of full year earnings estimates respectively.

Malaysian operations on solid footing. Approximately 90% of the group’s earnings up to 6MFY18 is contributed by the Malaysian operations. Net profit for the quarter from local operations grew by +24.9%yoy. The growth is also attributable to revenue consolidation of Langsat Terminals since it was acquired in September 2017.

Tank farm business expanding. Earnings from its tank farm business for the quarter expanded by +55.1%yoy to RM38.9m. The upbeat contribution is a result of Pengerang LNG (Two) Sdn Bhd which achieved its commercial operations and received the first commercial LNG cargo at its newly commissioned regasification terminal at Pengerang Deepwater Terminal in November 2017.

Focus on tank farms moving forward. Dialog’s strategy is clear – immediate to long-term focus on tank farms. Pengerang Deepwater Terminal Phase 1 is being expanded by 430,000m3 while construction of Phase 2 is on schedule. The company also indicated that new potential partners are being secured for Phase 3.

Source: MIDF Research - 15 Feb 2018