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Saturday, December 24, 2011


DIALOG Group Bhd's rights issue with warrants will significantly boost its financial muscle for expansion, says research analysts.

Dialog's proceeds from the exercise would be used to invest in upstream oil and gas opportunities including its risk-service contracts with Petroliam Nasional Bhd.

Kenanga Research says Dialog expects to raise RM473.2mil from the rights issue and a similar amount from the conversion of the warrants eventually.

Although the exercise is earnings per share-dilutive, Kenanga Research said, “We continue to like Dialog for its long-term sustainable earnings quality.”

OSK Research says the maximum earnings dilution expected is 30% if all the rights shares are taken up, and the free warrants are converted.

The exercise would involve a renounceable rights issue of up to 398.74 million new shares of 10 sen each with up to 199.37 million free detachable warrants.

The issue price of the rights shares is at RM1.20 each and the exercise price of the warrants is at RM2.40 each.

The warrants will mature in five years.

The rights issue would be on the basis of two shares and one free warrant for every 10 ordinary shares held in Dialog at 5pm on Jan 9, 2012.

Regarding Dialog's share price, OSK Retail Research is eyeing an initial upside target at RM2.79, followed by the RM2.88 level.

The cut-loss point is at below the RM2.50 level.

OSK Retail Research said the stock would continue to extend the rebound which started from the RM1.79 low in September. - By Thomas Huong

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