Dialog Group
(Dec 15, RM2.44)
Maintain outperform with target price RM3.64: The investor meeting we arranged for Dialog’s management yielded a nice surprise — its aggressive plan to bid for two or three more marginal field contracts next year.
This exciting development comes hot on the heels of the award of the Balai marginal field contract in August.
We are thrilled with this latest development which could give Dialog additional sources of long-term earnings. We maintain our “outperform” call and continue to value the stock at its sum-of-parts (SOP), which does not factor in the new marginal fields.
Yesterday, we took Chew Eng Kar, Dialog’s executive director of corporate services, and Sue Ngau, manager of corporate services, to meet with 15 fund managers.
A pleasant surprise from the meeting was Dialog’s ambitious plan to bid for two or three more marginal field developments in CY12 after securing the 15-year Balai contract in August together with Petronas Carigali Bhd and Australia-based Roc.
The development cost for a marginal field is around US$500 million (RM1.6 billion) to US$1 billion and we understand that Dialog is vying for at least a 30% stake. Management assured that it will not make anymore cash calls to finance its marginal field venture other than the ongoing rights issue.
Slated for completion in Feb 12, the rights issue is expected to raise around RM500 million.
As at end-September, Dialog had RM92 million (4.6 sen per share) net cash.
We are encouraged by its hard-hitting marginal field strategy which will allow it to undertake more upstream works. The marginal field contracts add to Dialog’s earnings visibility and give it steady income streams in addition to the Balai contract, tank terminal concessions (Kertih, Tanjung Langsat and Pengerang) and a supply base (Jubail, Saudi Arabia).
Stay invested. We believe that things can only get more exciting for Dialog as it moves up the value chain. Already, the company is the sector’s biggest Economic Transformation Programme winner through the Balai contract and the Pengerang tank terminal. — CIMB IB Research, Dec 15
(Dec 15, RM2.44)
Maintain outperform with target price RM3.64: The investor meeting we arranged for Dialog’s management yielded a nice surprise — its aggressive plan to bid for two or three more marginal field contracts next year.
This exciting development comes hot on the heels of the award of the Balai marginal field contract in August.
We are thrilled with this latest development which could give Dialog additional sources of long-term earnings. We maintain our “outperform” call and continue to value the stock at its sum-of-parts (SOP), which does not factor in the new marginal fields.
Yesterday, we took Chew Eng Kar, Dialog’s executive director of corporate services, and Sue Ngau, manager of corporate services, to meet with 15 fund managers.
A pleasant surprise from the meeting was Dialog’s ambitious plan to bid for two or three more marginal field developments in CY12 after securing the 15-year Balai contract in August together with Petronas Carigali Bhd and Australia-based Roc.
The development cost for a marginal field is around US$500 million (RM1.6 billion) to US$1 billion and we understand that Dialog is vying for at least a 30% stake. Management assured that it will not make anymore cash calls to finance its marginal field venture other than the ongoing rights issue.
Slated for completion in Feb 12, the rights issue is expected to raise around RM500 million.
As at end-September, Dialog had RM92 million (4.6 sen per share) net cash.
We are encouraged by its hard-hitting marginal field strategy which will allow it to undertake more upstream works. The marginal field contracts add to Dialog’s earnings visibility and give it steady income streams in addition to the Balai contract, tank terminal concessions (Kertih, Tanjung Langsat and Pengerang) and a supply base (Jubail, Saudi Arabia).
Stay invested. We believe that things can only get more exciting for Dialog as it moves up the value chain. Already, the company is the sector’s biggest Economic Transformation Programme winner through the Balai contract and the Pengerang tank terminal. — CIMB IB Research, Dec 15
