AmInvestment maintains ‘buy’ on Dialog, lowers earnings outlook

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KUALA LUMPUR: AmInvestment Bank Research has lowered its earnings forecasts on Dialog Group Bhd due to job delays resulting from the imposition of various Covid-19 movement restrictions.

The research house said it lowered its FY21-23 forecast earnings by 5% to 9% on a reduction in specialist, technical services and plant maintanence revenue assumptions in FY21.

The research house retained its “buy” call on the stock with a fair value of RM4.15 a share, down from RM4.80 a share, which implies a 2022 forecast price-earnings of 33x, below its five-year peak of 39x.

“Following our earnings revision, we now project Dialog’s FY21F net profit to decline by 7%, an unusual event for the group which has not suffered any annual earnings reduction over the past 15

years,” it said.

For 9MFY21, Dialog’s core net profit of RM392mil was below expectations at 64% and 68% of AmInvestment’s and consensus full-year estimates.

Moving forward however, AmInvestment expects the group’s core FY22 earnings to recover with the commencement of Dialog Pengerang Phase 5’s 430,000 cubic metre capacity for BP Singapore, which commenced March 2021 under Pengerang Phase 3.

Earnings growth will subsequently be supported by the completion of Tanjung Langsat 3 terminal’s remaining 75 cubic metre capacity by end-2921, with another 100,000 cubic metres commencing in 2022.

“Dialog currently trades at a FY22F PE of 24x, well below its 5-year peak of 39x.

“We view its higher-than-peer premium as justified given Dialog’s long-term recurring cash flow-generating businesses, underpinned by the Pengerang development’s multi-year value re-rating bonanza and low net gearing levels,” said AmInvestment.



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