Dialog’s prospects intact from steady model

KUCHING: Dialog Group Bhd’s (Dialog) results for the third quarter of the financial year 2017 (3QFY17) came in much higher than expected, confirming analysts’ belief that its long-term prospects remain intact from its steady growth model.

In a report, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) said Dialog recorded its best ever results in 3QFY17 led by stronger revenue and higher joint venture (JV) and associate income.

“Dialog booked in core net profit of RM95.6 million in 3QFY17 after excluding the gain on disposal of PPE and PPE write off.

“In tandem with a seven per cent increase in revenue, core net profit surged 10 per cent quarter-on-quarter (q-o-q) which we believe is largely due to stronger fabrication segment underpinned by higher activities from RAPID,” it said in its report.

Year-on-year (y-o-y), core net profit also improved by 22 per cent from RM78.4 million in tandem with 42 per cent stronger top-line. This was underpinned by stronger JV and associate contribution led by its Pengerang independent terminal.

“Cumulatively, core net profit also rose by 15 per cent on the above-mentioned reasons,” it added, noting that its JV and associate contribution jumped 87 per cent y-o-y to RM78.7 million in the first nine months of 2017 (9M17) as a result of improvement in better utilisation of tankers and rental rates.

Looking ahead, Kenanga Research pointed out that Dialog has a steady long term growth model.

“While the phase 1 independent terminal with a storage capacity of 1.3m metric tonne has been fully leased out to international oil majors and traders, there is a vacant land in which Dialog is considering to expand with a projection of additional capacity of 1m metric tonne.

“In addition, its Phase 2 project with another 2.1m metric tonne of storage capacity, targeted to reach completion by 2019 is still on track.”

It also noted that Dialog has also entered into a JV with a 25 per cent equity stake in the upcoming Pengerang Regasification project (RGT) with a total investment of RM2.7 billion.

“Earnings are expected by 2018 as the RGT will be completed by 4QCY17,” it added.

Overall, Kenanga Research upgraded its FY17 and FY18E earnings by 13 and 16 per cent on the back of higher revenue from both fabrication segment and higher specialist products and services division, and stronger JV and associate income assuming better tanker utilisation and stronger rates.

As for FY19E earnings, it projected a RM387.4 million growth, implying a 1.9 per cent increase y-o-y despite a seven per cent drop in revenue assuming lower contribution from fabrication segment but was cushioned by stronger JV and associate income led by Pengerang phase 2 and RGT projects.

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