Kenanga: Dialog to get recurring income from acquisition

PETALING JAYA: The move by oil and gas services provider Dialog Group Bhd to buy over the 45% stake in Centralised Terminals Sdn Bhd (CTSB) for RM193mil from MISC Bhd is viewed positively by the market, as the acquisition will deliver recurring income for the company.

Dialog’s acquisition of the remainder stake in CTSB, which owns a 80% stake in Langsat Terminal (One) Sdn Bhd (LT1) and Langsat Terminal (Two) Sdn Bhd (LT2), will allow the company to take control of the tank farm and terminal facilities business in Tanjung Langsat, Johor.

Kenanga Research said the acquisition would allow the company’s core net profit in the financial year ending June 30, 2018 (FY18) and FY19 to increase marginally by 2% to RM396.6mil and RM409.9mil, respectively.

“We are positive on the acquisition, as it allows Dialog to generate a higher stable recurring income from the existing two terminals, as well as to potentially accelerate the expansion of LT3.

The research house is maintaining an “outperform” call on Dialog.

Meanwhile, Maybank Investment Bank Research (Maybank IB) said the deal would be earnings-accretive for Dialog, as it would lift the company’s earnings by RM14mil to RM20mil annually in FY19 to FY20 based on preliminary assessment.

MIDF Research does not expect the disposal to significantly impact MISC’s earnings, as the disposal consideration of RM193mil represents less than 0.4% of MISC’s total assets.

“On top of the minimal earnings impact, the earnings contribution from the segment has not been meaningful to MISC, which derives the bulk of its earnings from its core liquefied natural gas, petroleum, offshore and heavy engineering businesses,” the research house said.