By May­bank In­vest­ment Bank Re­search Rat­ing: Hold Tar­get price: RM2.33

The Star Malaysia - StarBiz - - Analyst Reports -

WHILE May­bankIB Re­search has raised its tar­get price for Dia­log, the bro­ker­age down­graded its rat­ing for the oil and gas ser­vices provider.

It noted that the higher re­vised tar­get price of RM2.33 from RM2.26 pre­vi­ously was premised on ex­pec­ta­tions for higher earn­ings growth for the fi­nan­cial years end­ing June 30, 2018, to 2020.

The down­graded rat­ing of “hold” from “buy” pre­vi­ously, on the other hand, was be­cause May­bankIB be­lieved most of the pos­i­tives had al­ready been priced in and Dia­log was fairly val­ued for now, un­til new de­vel­op­ment at its ter­mi­nal busi­nesses un­folds.

“The CTF (cen­tralised tank­age fa­cil­ity) im­pact is priced in, in our view. Un­less new stor­age ca­pac­ity ex­pan­sion plans are un­veiled, Dia­log’s share price re­flects its cur­rent busi­ness op­er­a­tions,” May­bankIB said.

Dia­log’s shares had risen 45% year to date, out­per­form­ing the bench­mark FBM KLCI by 37%.

“We raised FY2018 to FY2020 earn­ings fore­casts and tar­get price by 3%, re­spec­tively, in­cor­po­rat­ing for the im­pact of its 45% ac­qui­si­tion of Cen­tralised Ter­mi­nals Sdn Bhd (CTSB),” it said.

Dia­log now owns 80% of Langsat Ter­mi­nal One and Two, fol­low­ing the com­ple­tion of the ac­qui­si­tion of a 45% stake in CTSB from MISC for RM137mil. The deal, said May­bankIB, was pos­i­tive for Dia­log, as it was ex­pected to add RM8mil to RM13mil per an­num to the com­pany’s bot­tom line and seven sen per share to net present value.

“With this, Dia­log will now have two av­enues for growth – Pengerang and Tan­jung Langsat,” May­bankIB said.

May­bankIB said while it would not rule out the pos­si­bil­ity of an ex­ten­sion for the con­ces­sion for Dia­log’s 30%-owned Ker­tih Cen­tralised Tank­age Fa­cil­ity (KCTF), which would end in 2020, there was a pos­si­bil­ity that the rates could be re­vised lower. KCTF con­trib­utes about RM30mil per an­num to the group’s earn­ings.

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