dialog group (dlg mk)
TRANSCRIPT
Results Note
Earnings & Valuation Summary
FYE 30 Jun 2019 2020 2021E 2022E 2023E Revenue (RMm) 2,386.5 2,303.4 2,612.5 2,716.4 2,830.0
EBITDA (RMm) 593.1 658.4 658.2 710.8 743.4 Pretax profit (RMm) 653.0 747.3 804.6 867.6 913.1 Net profit (RMm) 535.8 630.4 627.2 677.6 714.0 EPS (sen) 9.5 11.2 11.1 12.0 12.7 PER (x) 38.5 32.8 32.9 30.5 28.9 Core net profit (RMm) 535.0 588.3 627.2 677.6 714.0 Core EPS (sen) 9.5 10.4 11.1 12.0 12.7
Core EPS growth (%) 25.7 10.0 6.6 8.0 5.4 Core PER (x) 38.6 35.1 32.9 30.5 28.9 Net DPS (sen) 3.8 3.1 4.4 4.8 5.1 Dividend Yield (%) 1.0 0.8 1.2 1.3 1.4
EV/EBITDA (x) 27.9 25.0 22.9 21.5 20.7 Chg in EPS (%) - - New Affin/Consensus (%) 1.0 1.0 - Source: Company, Affin Hwang estimates
RM3.66 @ 18 August 2020
Share price performance
1M 3M 12M Absolute (%) -4.7 3.7 3.7 Rel KLCI (%) -3.6 -7.3 5.1
BUY HOLD SELL
Consensus 14 4 - Source: Bloomberg
Stock Data
Sector Oil & Gas
Issued shares (m) 5,638.3
Mkt cap (RMm)/(US$m) 20,636.2/4,932.8
Avg daily vol - 6mth (m) 9.4
52-wk range (RM) 2.7-3.99
Est free float 52.9%
Stock Beta 0.79
Net cash/(debt) (RMm) (670.8)
ROE (FY21E) 14.4%
Derivatives Yes
Shariah Compliant Yes
Key Shareholders
Employees Provident 9.2%
Wide Synergy Snd Bhd 7.7%
Azam Utama Sdn Bhd 7.6% Source: Affin, Bloomberg
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Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 Feb-20 Aug-20
(RM)
Tan Jianyuan, ACCA
T (603) 2146 7538
Dialog Group (DLG MK)
BUY (maintain) Price Target: RM4.30 Up/Downside: +18% Previous Target (Rating): RM4.30 (BUY)
Supported by higher Malaysia activities
Dialog’s FY20 core net profit at RM588m was within expectations, making up
101% of our and consensus full-year estimates
Malaysian activities were higher qoq in 4QFY20 which may suggest higher
Master Service Agreement (MSA) activities, offsetting the weaker upstream
performance following the slump in global oil prices
FY20 dividend payout ratio was lower at 28% (3.1sen) vs FY19 payout of 40%
(3.8sen). Reiterate Buy with an unchanged target price at RM4.30. Dialog is one
of our country and sector top Buys
FY20 profit grew 10% yoy
Dialog’s FY20 core net profit of RM588m (+10% yoy) made up 101% of our and
consensus full-year forecasts. FY20 EBITDA grew by 11% yoy attributable to the
consolidation of Halliburton Bayan Petroleum (HBP) since August 2019, and full
operation of Langsat 3 additional capacity since January 2020. JV profit was higher by
34% yoy driven by higher Pengerang Deepwater Terminal (PDT) utilisation and storage
rates.
Higher local activities offset weaker international, JV showed one-off profit dip
Malaysian activities recorded a 27% qoq increase in revenue, possibly from higher MSA
work recognition, which helped to offset the weaker upstream revenue as global oil prices
plunged. Middle East revenue dipped to its lowest since 4QFY17 on the back of a
slowdown in upstream activities. JV profit declined 26% sequentially to RM54m (3QFY20:
RM73m) largely due to a foreign translation loss recorded at the Pengerang LNG2
regasification terminal, which was guided to be around RM20m impact. Stripping that off,
JV profit would have been relatively flattish. Otherwise, PT1SB continued to operate near
full utilisation with storage rates well supported at SGD6.50-7/cbm.
Country top pick buy, unchanged TP at RM4.30
We introduce our FY23 forecast, with no changes to our existing estimates. We maintain
our SOTP-based target price at RM4.30, already factoring in a 3m cbm initial Phase 3
development, but yet to include the latest 200,000 planned Langsat 3 expansion. The
latest Langsat 3 expansion plan, while immaterial to overall group capacity (+4.7%), is
positive nonetheless, as it continues to showcase a high storage demand. Maintain Buy.
Downside risks: weaker storage utilisation and rates, delay in Phase 3 construction work
and securing new off takers.
19 August 2020
“Our country and sector top Buy”
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Fig 1: Results Comparison
FYE 30 Jun (RMm)
4Q FY19
3Q FY20
4Q FY20
QoQ % chg
YoY % chg FY19 FY20
YoY % chg Comments
Revenue 449.3 505.4 539.9 6.8 20.2 2,386.5 2,303.4 (3.5) Sequential improvement
driven by better Malaysia activities, offsetting weaker international units
Op costs (297.7) (354.2) (346.6) (2.2) 16.4 (1,793.4) (1,645.1) (8.3)
EBITDA 151.6 151.2 193.4 27.9 27.5 593.1 658.4 11.0
EBITDA margin (%)
33.7 29.9 35.8 5.9ppt 2.1ppt 24.9 28.6 3.7ppt Resulting from higher MSA margins activities
Depn and amort
(31.5) (40.5) (66.4) 64.0 110.8 (128.6) (192.8) 50.0
EBIT 120.1 110.7 127.0 14.7 5.7 464.5 465.6 0.2
EBIT margin (%)
26.7 21.9 23.5 1.6ppt -3.2ppt 19.5 20.2 0.7ppt
Int expense (12.7) (20.9) (14.3) (31.5) 12.4 (49.4) (54.6) 10.5
Int and other inc
14.1 13.4 12.2 (9.1) (14.0) 56.9 52.3 (8.1)
Associates and JVs
51.1 72.9 54.1 (25.7) 5.9 180.1 242.0 34.3 Sequential drop was affected by a one-off translation loss
EI 2.1 0.1 10.2 n.m 390.5 0.9 42.1 n.m Forex gain
Pretax profit
174.7 176.2 189.2 7.4 8.3 653.0 747.3 14.4
Core pretax
172.7 176.1 179.0 1.6 3.7 652.1 705.2 8.1
Tax (26.0) (24.9) (21.6) (13.4) (16.9) (100.7) (99.2) (1.5)
Tax rate (%)
14.9 14.1 11.4 -2.7ppt -3.5ppt 15.4 13.3 -2.1ppt
MI (8.0) (0.3) (10.9) n.m 35.3 (16.5) (17.7) 7.6
Net profit 140.7 151.0 156.7 3.7 11.3 535.8 630.4 17.6
EPS (sen) 2.5 2.7 2.8 3.7 11.3 9.5 11.2 17.6
Core profit 138.6 150.9 146.5 (3.0) 5.7 535.0 588.3 10.0 FY20 results in line with expectations, accounted for 101% of our and consensus forecasts
Source: Affin Hwang, Company data
Source: Affin Hwang, company data
Fig 2: Segmental Breakdown
FYE 30 Jun (RMm) 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 qoq
% pt chg
yoy
% pt chg
FY19 FY20 yoy
% pt chg
Group Revenue 449.3 645.8 612.3 505.4 539.9 6.8 20.2 2,386.5 2,303.4 -3.5
Malaysia 192.3 394.2 324.4 263.6 335.5 27.3 74.5 1,487.4 1,317.7 -11.4
Asia 106.1 105.4 127.8 104.5 87.9 -15.9 -17.1 339.1 425.7 25.5
Australia and NZ 88.3 72.9 98.6 78.2 80.1 2.5 -9.3 298.5 329.8 10.5
Middle East 61.7 70.1 61.4 57.6 35.3 -38.8 -42.8 254.0 224.3 -11.7
Other countries 1.0 3.3 0.1 1.4 1.1 n.m n.m 7.3 5.9 -19.6
Group PBT 174.7 194.3 187.6 176.0 189.4 7.6 8.4 653.0 747.3 14.4
Malaysia 153.7 179.2 157.3 174.8 180.6 3.3 17.5 582.4 691.9 18.8
Asia 7.5 3.7 10.2 -5.6 -0.2 n.m -102.9 13.8 8.1 -41.4
Australia and NZ 4.9 1.2 10.2 1.2 4.3 267.3 -11.9 12.3 17.0 38.1
Middle East 8.6 10.1 9.9 5.6 4.2 -24.2 -50.8 44.8 29.9 -33.3
Other countries 0.0 0.0 0.0 0.0 0.4 -0.3 0.4 n.m
Group PBT margin 38.9% 30.1% 30.6% 34.8% 35.1% 0.3% -3.8% 27.4% 32.4% 5.1%
Malaysia 79.9% 45.5% 48.5% 66.3% 53.8% -12.5% -26.1% 39.2% 52.5% 13.4%
Asia 7.1% 3.5% 8.0% -5.4% -0.2% 5.1% -7.3% 4.1% 1.9% -2.2%
Australia and NZ 5.6% 1.6% 10.4% 1.5% 5.4% 3.9% -0.2% 4.1% 5.1% 1.0%
Middle East 14.0% 14.5% 16.1% 9.7% 12.0% 2.3% -1.9% 17.6% 13.3% -4.3%
Other countries -2.3% 0.0% 0.0% 0.0% 39.4% 39.4% 41.7% -3.4% 7.3% 10.7%
3
Fig 3: SOTP value of Dialog
Sum of parts valuation Value
(RM m)
Value
per
share
(RM)
Remarks
Traditional Oil & Gas services businesses 10,951.9 1.95 16x FY21E EV/EBITDA
Kertih Terminals (30% stake) 384.2 0.07 400k m³. Factored in extension until 2035E
Langsat 1&2 - 647k m³. Firm period expiry until 2037
Langsat 3 - 300k m³. Firm period expiry until 2048
Pengerang Terminal Phase 1 (46% stake) 1,219.7 0.22 1.7m m³ factoring in upcoming 1E's expansion of 430k m³
Pengerang Terminal Phase 2 (25% stake) 1,619.4 0.29 Total 1.4m m³
Pengerang Terminal LNG (25% stake) 1,616.2 0.29 2 x 100k m³ capacity
Pengerang Phase 3 expansion 6,746.8 1.20 Factored in 3cbm³ expansion @ 60% stake
Upstream assets 1,209.6 0.21 NPV of FCFF at 6.6% WACC
Enterprise Value 24,846.4 4.42
Net Cash/(debt) (673.8) (0.12)
Equity Value 24,172.5 4.30
Langsat 1-3 Terminals (100% stake) 1,098.7 0.19
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Important Disclosures and Disclaimer
Equity Rating Structure and Definitions
BUY Total return is expected to exceed +10% over a 12-month period
HOLD Total return is expected to be between -5% and +10% over a 12-month period
SELL Total return is expected to be below -5% over a 12-month period
NOT RATED Affin Hwang Investment Bank Berhad does not provide research coverage or rating for this company. Report is intended as information only and not as a
recommendation
The total expected return is defined as the percentage upside/downside to our target price plus the net dividend yield over the next 12 months.
OVERWEIGHT Industry, as defined by the analyst’s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months
NEUTRAL Industry, as defined by the analyst’s coverage universe, is expected to perform inline with the KLCI benchmark over the next 12 months
UNDERWEIGHT Industry, as defined by the analyst’s coverage universe is expected to under-perform the KLCI benchmark over the next 12 months
This report is intended for information purposes only and has been prepared by Affin Hwang Investment Bank Berhad (14389-U) (“the Company”) based on sources believed to be reliable and is not to be taken in substitution for the exercise of your judgment. You should obtain independent financial, legal, tax or such other professional advice, when making your independent appraisal, assessment, review and evaluation of the company/entity covered in this report, and the extent of the risk involved in doing so, before investing or participating in any of the securities or investment strategies or transactions discussed in this report. However, such sources have not been independently verified by the Company, and as such the Company does not give any guarantee, representation or warranty (expressed or implied) as to the adequacy, accuracy, reliability or completeness of the information and/or opinion provided or rendered in this report. Facts, information, estimates, views and/or opinion presented in this report have not been reviewed by, may not reflect information known to, and may present a differing view expressed by other business units within the Company, including investment banking personnel and the same are subject to change without notice. Reports issued by the Company, are prepared in accordance with the Company’s policies for managing conflicts of interest. Under no circumstances shall the Company, be liable in any manner whatsoever for any consequences (including but are not limited to any direct, indirect or consequential losses, loss of profit and damages) arising from the use of or reliance on the information and/or opinion provided or rendered in this report. Under no circumstances shall this report be construed as an offer to sell or a solicitation of an offer to buy any securities. The Company its directors, its employees and their respective associates may have positions or financial interest in the securities mentioned therein. The Company, its directors, its employees and their respective associates may further act as market maker, may have assumed an underwriting commitment, deal with such securities, may also perform or seek to perform investment banking services, advisory and other services relating to the subject company/entity, and may also make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report. The Company, its directors, its employees and their respective associates, may provide, or have provided in the past 12 months investment banking, corporate finance or other services and may receive, or may have received compensation for the services provided from the subject company/entity covered in this report. No part of the research analyst’s compensation or benefit was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Employees of the Company may serve as a board member of the subject company/entity covered in this report. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data. This report, or any portion thereof may not be reprinted, sold or redistributed without the written consent of the Company. This report is printed and published by: Affin Hwang Investment Bank Berhad (14389-U) A Participating Organisation of Bursa Malaysia Securities Berhad 22nd Floor, Menara Boustead, 69, Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia. T : + 603 2142 3700 F : + 603 2146 7630 [email protected] www.affinhwang.com