Friday, June 15, 2012

Dialog Group: Bags MYR17m Snamprogetti Job (MIB)

Dialog Group
Buy (unchanged)
Share price: MYR2.38
Target price: MYR3.05 (unchanged )
Bags MYR17m Snamprogetti Job

Maintain BUY; TP unchanged at MYR3.05. That Dialog has bagged its maiden contract from Snamprogetti (MYR17m) for the supply base operations in Jubail is positive. Impact to order backlog and earnings is negligible but we expect job win momentum to build up as it grows its expertise in the Middle East. Nevertheless, its long-term tank terminal expansion program in Johor will be its trump card - for earnings, cashflows and dividends. Our target price is based on sum-of-parts.

Secures maiden contract at its Jubail Supply Base. Dialog, via its 60% subsidiary Dialog Jubail Supply Base Company Ltd., has secured a logistics services contract from Snamprogetti Saudi Arabia Co. Ltd.. The contract, valued at MYR17m (SAR20m), will commence immediately and will run for 1.5 years, with the option for further extension. The work scope involves utilisation of Dialog’s base services to assist in the movement of project cargo from Land onto Projects Cargo Vessels, and to offshore sites for the Saudi Aramco Wasit Gas Development–Hasbah Offshore Facility in Saudi Arabia.

Marginal 1% impact to earnings. While this project is small in value, it could mark the beginning of Dialog’s job win momentum in Saudi Arabia as it fills up orders at the Jubail Supply Base and consolidates its reputation there. We project that this contract will contribute about MYR1.5-2.0m p.a. to group earnings, based on an estimated 15-20% net margin and 60% equity stake. Much of the earnings will be recognised in FY6/13. We are keeping our forecasts unchanged, as we estimate this project to account for just 1% of FY6/13 earnings.

Optimistic prospects ahead. Dialog is a growth stock (3-year net profit CAGR of 21%) with sustainable earnings visibility from its tank terminal operations in Johor and Terengganu. The tank terminal operations provide modest cashflows, which would support its dividend payments. There are upside to our earnings forecasts, for we have yet to incorporate contributions from its Balai Risk Sharing Contract (RSC) project with its partners (Roc Oil and Petronas Carigali).

Source/Extract/Excerpts/来源/转贴/摘录: Maybank Kim Eng Research
Publish date: 14/06/12

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