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