KUALA LUMPUR: AmInvestment Research is reiterating its Buy recommendation on Dialog Group with a higher fair value of RM2.24 a share from an earlier RM1.97 a share.
The research house said on Wednesday it had rolled forward its earnings multiples to CY18F and
introducing the valuation of 600 acres of industrial and buffer land in Pengerang at RM30 psf to its revised sum-of-parts (SOP) estimate, which implies a CY18F PE of 31 times.
“Currently, property agents’ asking price for industrial land in Sg Rengit in Pengerang has reached RM85 psf,” it said.
AmInvestment Research also raised Dialog’s FY17F-FY19F earnings by 4%-7% as its 9MFY17 normalised net profit of RM249mil, excluding lumpy gains of RM22mil mainly from an office-cum-warehouse sale in Singapore, came in above expectations, accounting for 77% of its FY17F earnings and 79% of street’s RM316mil.
For comparison, 9MFY16 accounted for 71% of FY16 earnings. The group also declared an interim dividend of 1.2 sen (+0.2 sen on-year ), above its expectations.
Dialog’s 9MFY17 normalised net profit rose by an estimated 15% on-year from an 87% surge in associate contribution to RM79mil with the full contribution of its Pengerang Phase 1 tank terminals and improved spot storage rates.
The overall improved 9MFY17 bottom line also benefited from higher progress work recognition for Pengerang Deepwater phase 2, Samsung’s Jetty Topside works and a plasticiser plant for UPC Chemicals in Kuantan.
On a quarter-on-quarter comparison, Dialog’s 3QFY17 core net profit rose 9% to RM94mil from the Pengerang progress works and higher specialist products sales in India, Russia and the Middle East.
The RM5.5bil contract for the construction of PDT Phase 2 currently occupies Dialog’s fabrication, engineering and construction division, and underpins the group’s earnings over the next two to three years.
The group’s progress on the RM6.3bil PDT Phase 2 is on track as the RAPID complex remains on schedule with progressive completion in 2018-2019.
Additionally, the RM2.7bil LNG regasification plant and storage tanks, in which Dialog has a 25% equity stake, are scheduled for completion by end-2017.
For the Pengerang LNG regasification project, in which 2 tanks with a combined capacity of 200,000 cubic metres are being built at a cost of RM2.7bil, the first tank will be completed by July 2017 while the second tank by December 2017.
This will cater to Petronas’ 1,220MW power plant, which will also provide up to 1,480 tonnes per hour of steam for plants within the RAPID complex.
“Currently, Dialog is trading at a CY18F PE of 26 times, below its five-year peak of 29 times. We view the premium as justified given Dialog’s long-term recurring cash flow-generating businesses, which are largely cushioned from volatile crude oil price cycles,” said AmInvestment Research.