Dialog Group 3QFY09 below - Muted performance (ext: CIMB)

The earnings adjustments lower our target price from RM1.10 to RM0.93, pegged to a forward P/E of 13.5x (previously 12x), on par with our target market P/E. We downgrade our call from outperform to UNDERPERFORM, with the potential de-rating catalysts being 1) continuing margin threat, and 2) delay in finding new partners for the Tanjung Langsat development. Valuations are demanding at 16-19x P/E, making Dialog the most expensive stock in our O&G portfolio. Switch to our top pick Petra Perdana, which offers the cheapest valuations despite having the most growth potential.