Dialog H1 earnings beat forecast, CIMB Research retains Add

KUALA LUMPUR: Dialog Group Bhd ’s 1HFY6/18 core net profit of RM201mil outperformed CIMB Equities Research’s forecast as it represented 60% of its previous full-year forecast but was in line at 50% of consensus. 

The research house said on Thursday that it thinks that it was the engineering, procurement, construction and commissioning (EPCC) division that performed better than expected given the ongoing construction at Pengerang Phase 1 & 2.

“We maintain Add, with a slightly higher sum-of-parts based target price of RM3.15. 

“Catalysts include the ongoing expansion of Pengerang Phase 1 and the Langsat terminals, plus a potential flag-off of Pengerang Phase 3,” it said.

To recap, CIMB Research said Dialog delivered an impressive 2Q core net profit of RM113mil, 53% higher on-year. 

The 1H performance was similarly impressive, with 48% growth in core net profit to RM201m. 

The growth was driven mainly by two sources: 1) Dialog purchased an additional 36% effective stake in the Langsat 1 and Langsat 2 terminals and consolidated its enlarged 80% stake from Sept 29,  2017 onwards, and 2) the LNG regasification plant at Pengerang SPV3 officially commenced commercial operations on Nov 1, 2017. 

CIMB Research pointed out Dialog also noted that its EPCC activities picked up on-year, as did plant maintenance services. 

Dialog noted that its international operations remained challenging, with a 23% on-year decline in quarterly revenue. 

This was due to lower sales of specialist products and services in India, Russia and Australia, reduced engineering and construction activities in Singapore and reduced fabrication activities in Australia and New Zealand. 

The tank terminals business, which was represented in 2QFY18 by the 30%-owned Kertih terminal and 46%-owned Pengerang SPV1 terminal, was likely stable.

 The associate-level earnings rose from RM25m in 2QFY17 to RM39m in 2QFY18 as the 46%-owned Pengerang SPV3 LNG regasification plant commenced operations on Nov 1, 2017 but this was partially offset by the absence of contribution from the erstwhile 44%-owned Langsat terminals as they were consolidated as an 80% subsidiary in 2QFY18. 

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