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Tuesday, December 21, 2010

Dialog - Tanking up for the future in Pengerang (CIMB)

Upgrade to OUTPERFORM. We have been too conservative with our forecasts for Dialog, which is now on an accelerated growth plan. Supported by Pengerang Terminal, Tanjung Langsat Terminal and Jubail Supply Base, Dialog is set for a quantum leap in FY6/12. Factoring in the three developments, we raise our EPS forecasts by 14.0% for FY11, 49.3% for FY12 and 67.6% for FY13. DPS is maintained at 4.0 sen for FY11 but raised from 4.0 sen to 5.1-6.3 sen for FY12-13.  Given the growth acceleration, we now value the stock at 17.4x P/E, a 20% premium over our 14.5x target market P/E instead of parity. This, together with our earnings upgrade, doubles our target price from RM1.10 to RM2.20. We upgrade our recommendation from Underperform to OUTPERFORM, with the potential catalysts being 1) commencement of the Pengerang project, and 2) EPCC order book replenishment.

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