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BIMBSec - Dialog Company Update - Higher and Deeper - 20120625

BIMBSec - Dialog Company Update - Higher and Deeper - 20120625

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Published by: Bimb Sec on Jun 25, 2012
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06/25/2012

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BIMB SECURITIES RESEARCH
MARKET INSIGHT
Monday, 25 June, 2012
Company Update
PP16795/03/2013(031743)
 
| 1
Dialog
Buy
Higher and Deeper
Price: RM2.38Target Price: RM2.78
Stock Data 
Bloomberg Ticker DLG MK Altman Z-score 7.0Market Cap 5,822.8 YTD price chg 1.3%Issued shares 2,406.1 YTD KLCI chg 4.7%52-week range (H) 2.535 Beta 1.452-week range (L) 1.63
Major Shareholders
3-mth avg daily volume 4.5 EPF 15.6%Free Float 56.0% Azam Utama SB 11.1%Shariah Compliant Y Wide Synergy SB 10.4%Financial Derivatives DLG MK
Share Performance (%)
 
1mth 3mth 12mth
Absolute 7.6% 7.1% 0.6%vs. KLCI 3.6% 5.5% -3.0%
Financial Highlights FYE 30 Jun 2009 2010 2011 2012E 2013E
Turnover 1,104.5 1,139.1 1,208.4 1,409.6 1,729.7EBIT 96.9 118.6 165.0 156.8 194.4Pretax profit 123.5 150.0 200.5 207.6 250.6
Core Net Profit 91.9 118.3 152.3 176.5 213.0
EBIT margin 8.8% 10.4% 13.7% 11.1% 11.2%Pretax margin 11.2% 13.2% 16.6% 14.7% 14.5%Effective tax rate -17.8% -16.9% -20.1% -20.0% -20.0%ROE 20.9% 24.8% 26.1% 15.2% 16.7%ROA 13.4% 13.9% 14.8% 9.0% 8.4%Net Gearing (x) Net cash Net cash
 
Net cash
 
Net cash
 
Net cash
 
Core EPS (sen) 3.8 4.9 6.3 7.3 8.9Core EPS growth 21.6% 28.7% 28.7% 15.9% 20.7%PER (x) 63.3 49.2 38.2 33.0 27.3DPS (sen) 1.6 2.3 2.8 3.3 4.0Div. Yield (%) 0.6% 0.9% 1.2% 1.4% 1.6%NTA/share (RM) 0.19 0.21 0.24 0.49 0.53
Growth ratios 
Turnover 39.7% 3.1% 6.1% 16.7% 22.7%EBIT 44.1% 22.3% 39.2% -5.0% 24.0%Pretax profit 27.0% 21.5% 33.7% 3.5% 20.7%Core Net profit 21.6% 28.7% 28.7% 15.9% 20.7%
Share Price Chart
 
Chiong Tong Chai
 
03-26918887 ext 175
 
In line with our expectation of robust corporate activitieswithin the domestic O&G segment, Dialog announced aMoU with global oilfield titan Halliburton, to jointlycooperate in pursuing job opportunities to re-developmature oilfields in Malaysia. We see this a positive movefor Dialog in beefing up its upstream execution capabilitieswhich could also bring along not only jobs related tooilfield re-development but over a longer term serve as agood platform for the Group to move into independent oilplayer league. No change in forecast and target price of RM2.78.Robust corporate activities.
A combination by local playerson the need to improve their technical/servicecapabilities/offering suite and foreign players attracted by
Petronas’ massive 5 year capex have created robust
corporate exercise within domestic O&G segment YTD,which we have anticipated earlier on. We expect the trendwill continue for a foreseeable future as more jobs areexpected which usually entails
Petronas’ local
content/participation requirements. We view positively as away to transform domestic players onto internationalleague.
Supportive demand background.
With about 60% of 
Petronas’ domestic producing fields have been producing
for 19-28 years, production in these fields may already be ina production plateau or even moved into a stage of declining production. As such, we see a natural demand forextension of the economic producing life of these affectedoilfields via various re-development techniques.
Strong partner = Better chance.
Halliburton is one of thebig names in the global oilfield services
providers’
league.
Dialog’s ability to secure such a big player as its partner can
be seen as a strong testimony on its track records and webelieve that jobs winning chances for the JV would be good.
No change in forecast.
We made no change in our forecast.
View & Valuation
. We continue to favour the stock for itsstrong delivery track record and continue to see thecompany as one of the strong contenders for additional risksharing contracts from Petronas which certainly would helpboost its existing strong recurring earnings profile. Maintainour
Buy
call at SOP target price of 
RM2.78
.

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