Period 3Q12
Actual vs. Expectations
3Q12 net profit of
RM41.4m came in below expectations. We had expected it to be RM55m. We believe
the discrepancy would be due to timing issue for its EPCC jobs.
9M12 net profit of
RM127.4m accounted for 62% and 65% of ours as well as the consensus’ fullyear
estimates.
Dividends Declared net DPS of 1.1 sen in 3Q12 vs. 1.3
sen last year. Ex-date: 15 Jun, payment date: 29 Jun.
Key Results Highlights
QoQ, flattish 3Q12
net profit, which we believe was due to timing issue for its EPCC jobs, despite
revenue surging 17%. The increase in revenue was partly due to the commencement
of LT2.
8% YoY hike in 3Q12
net profit and 19% jump in 9M12 net profit were due largely to earnings contributions
from New Zealand-based Fitzroy Engineering Group Ltd, which was acquired in Apr
2011.
Outlook Despite
the soft 3Q12 results, we expect its earnings to reach a high phase from 2HFY12
onwards as the new source of incomes kicked in, such as LT2 and EPCC jobs from
the LT3, Pengerang CTF and Balai Marginal Fields contracts. These in-house EPCC
jobs should keep Dialog busy till 2014.
Change to Forecasts
We have cut our
FY12E-FY14E EPS and GDPS by 9%, 4% and 4% respectively due to:
1) an overestimation
of Pengerang CTF’s EPCC job in FY12 where we had assumed the job to start in
Jul 2011 but it actually started only in Nov 2011, and
2) the cut in our
operating margin estimates for LT1 & LT2 to 22.5% from 35% respectively as per
the latest management’s guidance.
Rating MAINTAIN OUTPERFORM
Valuation We
are rolling over our valuation base year to 2013 from 2012, thus our
SOP-derived price target is now RM3.09/share from RM2.80/share despite our
earnings downgrade.
Risks Delays
in its in-house EPCC jobs that will impact its future recurring incomes
negatively.
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