DIALOG–Fundamental Analysis (18 Nov 2015)

2015-11-18 Uncategorized DIALOG, DIALOG GROUP BERHAD, FBMKLCI, Fundamental Analysis, KLSE

Fundamental Analysis as of FY15 – http://www.slideshare.net/lcchong76/dialog-fundamental-analysis-fy15

Excel – http://1drv.ms/1Oeon5E

Latest Financial – Q1 2016 Financial Report (17 Nov 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4922597

FY16 Q1 Results Highlight:

• Net profit increased to RM60.07 million or 1.18 sen a share in the three months ended Sept 30, 2015 (1QFY16) from RM49.91 million or 1.02 sen a share a year ago, mainly due to higher fabrication activities in New Zealand and better margins on sales of specialist products and services, which are mostly denominated in US dollar.
• Revenue for 1QFY16 was slightly lower at RM536.37 million from RM541.55 million in 1QFY15, on lower revenue from its international operation.
• However, revenue from its Malaysian operation for 1QFY16 was higher, mainly contributed by the engineering and construction activities from ongoing projects, said Dialog.
• The works on Phase 2 of the Pengerang Deepwater Terminal (in Johor) are progressing as schedule. In addition, the group is also involved in various projects such as the MLNG Train 9 and SAMUR piping works. However, the higher revenue recorded from these activities was offset by lower sales in specialist products and services and upstream activities.
• There is a one-time transaction: Gain of RM1,949,000 from disposal of one subsidiary

Valuation:

• Absolute EY%:
  • Trailing:
    • FY15 (EPS: 0.054) – 1.770 (Uncertainty Risk: HIGH)
    • R4Q (EPS: 0.055) – 1.812 (Uncertainty Risk: HIGH)
  • Forward:
    • FY16 (EPS: 0.056 ± 5%) – From 1.756 to 1.941 (Uncertainty Risk: MEDIUM to HIGH)
    • FY17 (EPS: 0.062 ± 5%) – From 1.936 to 2.139 (Uncertainty Risk: MEDIUM)
  • EPS applied to reach the current stock price (1.64): 0.050
• In my opinion, fair value of DIALOG range from 1.7 to 2.1. Uncertainty risk of fair value is from MEDIUM to HIGH.

Going Forward:

• On prospects, Dialog said the drop in oil prices will lower the overall costs of processing, manufacturing and production of a wide range of petroleum and petrochemical products. This would have a positive impact on the midstream and downstream sectors of the oil and gas industry.
• Phase 1 of the Pengerang Deepwater Terminal is in full operation with 1.3 million cu m fully leased out.
• Phase 2 will have 2.1 million cu m of storage capacity, with a total investment cost of RM6.3 billion and is scheduled to be completed progressively in 2018 and 2019.
• Valuations may not very compelling, but not bad. DIALOG still appeals to funds seeking earnings stability
• I will continue to hold and accumulate this counter.

At the time of writing, I owned shares of DIALOG.