9MFY13 net profit of MYR141.4m (+10.7% y-o-y) was slightly below our and consensus expectations. That said, its business prospects continue to support growth as evidenced by the 37.3% y-o-y surge in revenue. We like the stock’s defensiveness and solid business model. Maintain BUY, with a higher FV of MYR3.16, following an internal streamlining of resources.

-  Slightly missing estimates, but all is intact. Dialog’s 9MFY13 net profit of MYR141.4m (+10.7% y-o-y, -1.6% q-o-q) was slightly below our and consensus expectations, accounting for only 68.4% and 67.3% of both full year estimates. The lower-than-expected earnings were largely attributed to cost overruns relating to a plant maintenance project undertaken in Singapore. Despite the unexpectedly weaker earnings, the group’s revenue jumped to MYR1.56bn (+37.3% y-o-y, +26.5% q-o-q), buoyed by increasing engineering, procurement, construction and commissioning (EPCC) activities at the Pengerang deepwater terminal in Pengerang, Johor.

-  Declares 11% interim dividend. The Group also declared a single-tier cash dividend of 11%, which translates into a yield of 0.4% based on its last closing price of MYR2.79.  i  Minor tweaks to our earnings forecasts. Following an internal re-allocation of resources, we revisited our estimates and lower our FY13 and FY14 net profit forecasts by 7.1% and 2.5% respectively as we believe that interest expenses relating to its marginal oilfield development will weigh down Group earnings in the near term.  

-  Maintain BUY. We reiterate our BUY recommendation on the stock, with a higher MYR3.16 FV (previously MYR2.80), based on SOP valuation (please see Figure 2). We see more room for upgrades as our FV does not include: i) the impact of Dialog’s involvement in the Balai risk sharing contract (RSC) development, ii) the full potential earnings from the Pengerang centralized tank farm (CTF) project, and iii) further expansion of Tanjung Langsat (Phase 3 and beyond), which is currently on hold.

Source: RHB