Dialog Group Bhd (3Q15)

[2015-05-14]

• At 3Q15 run-rate, which has very minimal Pengerang Phase 1 contribution, DLG is already on track to beat consensus earnings forecasts for next year by 10%. With Phase 1, we think DLG can beat consensus numbers by more than 30% in FY16.
  
• We continue to think consensus expectations are too low for FY16. DLG remains an OUTPERFORM; at the current price, investors would be purchasing a solid growing business with a wide economic moat in Pengerang, at a decent discount to intrinsic worth.
  

[2015-05-12]

• Pengerang’s Phase 1 in full operation; all eyes now on Phase 2 and Phase 3. We believe management is on track with Phase 2 (2.1 million m3 of storage at M$6.3bn with DLG’s stake at 25%) expected to start operations in 2019 and Phase 3 (LNG storage and regasification project at M$2.7bn with DLG’s stake at 25%) expected to start operations at end 2017/early 2018. EPCC work for Phase 2 has already started. In upstream, the Bayan field continues production enhancement while development activity is also being aggressively pursued for the D35, J4 and D21 fields to rejuvenate and increase oil production.
  
• Reiterate OW: While Dialog is not fully insulated from the oil price shock given its Upstream exposure (via Balai, Bayan & D35 PSC), with its oil storage business accounting for ~60% of our SOTP and 30-40% of earnings, we see Dialog as best positioned within the Malaysian Oil & Gas sector as well as ASEAN Oil Services.