Dialog’s 9MFY12 results were surprisingly below
expectations, probably due to the timing in the recognition of higher margin
contracts, apart from the slowerthan-expected plant maintenance services
which usually yield higher
margins than other divisions. We are downgrading our FY12 earnings by 9% to
reflect the weaker than estimated 3QFY12 results. Maintain Buy, but at a lower fair value of RM2.99. We still
like Dialog, being one of the most
defensive O&G stocks in its sector, and one that possesses a sound business
model.
Below estimates.
Dialog’s 9MFY12 results were surprisingly below consensus and our expectations,
making up only 65% and 67% of the FY12 forecasts respectively. We believe
this was due to timing in the
recognition of higher margin contracts, apart from slower-than-expected plant
maintenance services, which usually
fetch higher margins compared
with the company’s other divisions. Hence, although the 3QFY12 revenue was higher by
17.1% q-o-q, Dialog’s net profit
growth was quite flat at -0.1% q-o-q. Nevertheless, both revenue and
net profit improved YTD, climbing 36.0% and 18.6% respectively, contributed by the consolidation of newly
acquired Fitzroy Engineering Group Ltd from New Zealand, as well as higher
contribution from the group’s specialist products and services from Brunei,
Thailand, Middle East and China.
Downgrading FY12
earnings by 9%. Although we remain positive on the company's performance
going forward, as we highlighted in our company update yesterday, we also understand
that the company’s 4QFY12 is likely to be better as the quarter would not bear the
effects of the monsoon season. Hence, we are still tweaking down our FY12
forecast by 9% to reflect the slower-than-expected results for the quarter
under review.
Maintain Buy. Our
fair value for Dialog has been nudged
down to RM2.99 (previously RM3.07),
based on sum of parts valuation. We continue to like Dialog as it is one of the
most defensive O&G stocks in its sector, and one that possesses a sound
business model. The counter is our defensive pick in the O&G sector.
Source: OSK188
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