1QFY16 net profit fell short of our/consensus expectations at only 20%/22% of full-year earnings. Maintain BUY with a MYR1.82 TP (from MYR1.83, 11% upside), as we believe the company’s long-term value remains to be unlocked. We expect earnings to pick up in the coming quarters, driven by its MYR5.5bn EPCC orderbook from Pengerang Terminal Two, LNG train 9 and SAMUR.

Core earnings of MYR48.2m. Dialog’s 1QFY16 (Jun) revenue came in flat YoY mainly due to lower sales of specialist products and services as well as a decline in upstream activities. These were offset by higher fabrication, and engineering and construction activities. These were mainly from Phase 2 of the Pengerang Terminal Two project, liquefied natural gas (LNG) train 9 in Bintulu and piping works for the Sabah Ammonia and Urea (SAMUR) project. Its 46% involvement in the Pengerang Independent Terminals project – 44% owned by Royal Vopak NV (VPA NA, NR) and 10% by the Johor State Government – provides abright spot as earnings from the 1.3m cu m (cbm) tank terminals jumped122% YoY. This is as, we understand, the storage capacity has been fully leased up.

Outlook. Its engineering, construction and fabrication division wouldcontinue to be busy as Dialog is involved in the engineering, procurement, construction and commissioning (EPCC) works for Pengerang Terminal Two, a dedicated terminal for the Refinery and Petrochemical Integrated Development (RAPID) project. The latter is slated to be up and running in 2019. On its oilfield side, we understand that Dialog’s production sharing contract for D35, D21 and J4 is on track with the three oilfields continuing to produce at the moment. Further drilling campaigns for D35 are currently being planned.

Maintain BUY with TP of MYR1.82 (from MYR1.83). We adjust our FY16F/FY17F earnings lower by 6%/10% respectively, as we expect lower contributions from Dialog’s specialist products and services on lower upstream activities. This ought to be offset by higher revenue from its tank terminals business, as storage rates are denominated in SGD. We maintain our BUY on Dialog as we believe its long-term value from its involvement in Pengerang, independent and dedicated storage terminals, and LNG regasification facility remains unlocked. Our SOPbased MYR1.82 TP implies 33x FY16 P/E, which is +1SD of its historicalP/E.