Dialog Group Bhd
(Jan 4, RM2.66)
Initiate coverage with a buy call at RM2.64 with target price of RM3.30: Dialog’s integrated technical services will underpin its future growth.
Its impressive track record — five-year historical earnings compound annual growth rate (CAGR) of 28% and three-year average return on equity of 27% — speaks volumes of its execution capability.
We are projecting three-year earnings CAGR of 17% over FY11-14 supported by higher capacity at the Tanjung Langsat terminal and a RM2.3 billion construction order book.
Dialog will almost triple combined capacity at its oil terminals in Kertih and Tanjung Langsat from one million cu m now to 2.8 million cu m within the next three years, with phase 1 of Pengerang and phase 3 of Tanjung Langsat coming on stream. We estimate over 70% of its earnings are now recurring. Strong partnerships with global oil traders such as Trafigura and Vopak could present more opportunities going forward.
Balai cluster fields are now in pre-development phase with first production likely by 2H14, and potentially contributing RM40 million profit in FY15. The risk service contract (RSC) is a major springboard for Dialog to move up the value chain as an exploration and production player, which complements its integrated technical services.
A second marginal field RSC may be on the cards after the RM479 million rights issue to boost its war chest for more upstream development.
We initiate coverage of Dialog with a sum-of-parts-derived target price of RM3.30 (post-rights: RM2.95, ex on Jan 5, 2012).
Its rights issue (RM1.20/share) with free warrants offers a good entry point. We are optimistic of Dialog’s prospects, as its growing tank terminal business will underpin long-term earnings visibility.
The massive Pengerang project in Johor over the next seven years is also a major transformation for Dialog. There should be little execution risk given Dialog’s proven track record and solid balance sheet. — HwangDBS Vickers Research, Jan 4
(Jan 4, RM2.66)
Initiate coverage with a buy call at RM2.64 with target price of RM3.30: Dialog’s integrated technical services will underpin its future growth.
Its impressive track record — five-year historical earnings compound annual growth rate (CAGR) of 28% and three-year average return on equity of 27% — speaks volumes of its execution capability.
We are projecting three-year earnings CAGR of 17% over FY11-14 supported by higher capacity at the Tanjung Langsat terminal and a RM2.3 billion construction order book.
Dialog will almost triple combined capacity at its oil terminals in Kertih and Tanjung Langsat from one million cu m now to 2.8 million cu m within the next three years, with phase 1 of Pengerang and phase 3 of Tanjung Langsat coming on stream. We estimate over 70% of its earnings are now recurring. Strong partnerships with global oil traders such as Trafigura and Vopak could present more opportunities going forward.
Balai cluster fields are now in pre-development phase with first production likely by 2H14, and potentially contributing RM40 million profit in FY15. The risk service contract (RSC) is a major springboard for Dialog to move up the value chain as an exploration and production player, which complements its integrated technical services.
A second marginal field RSC may be on the cards after the RM479 million rights issue to boost its war chest for more upstream development.
We initiate coverage of Dialog with a sum-of-parts-derived target price of RM3.30 (post-rights: RM2.95, ex on Jan 5, 2012).
Its rights issue (RM1.20/share) with free warrants offers a good entry point. We are optimistic of Dialog’s prospects, as its growing tank terminal business will underpin long-term earnings visibility.
The massive Pengerang project in Johor over the next seven years is also a major transformation for Dialog. There should be little execution risk given Dialog’s proven track record and solid balance sheet. — HwangDBS Vickers Research, Jan 4
