Dialog reported a marginal slip in net profit by -0.6%yoy but added +1.1%qoq to RM127.2m in 1QFY23. For 6MFY23, earnings dropped to RM252.9m, which came in below research house MIDF’s one-year estimate at 37%, and consensuses at 40%. The lower earnings were caused by increased costs of the group’s operations and current projects. The risks of the Covid19 pandemic, the Russia-Ukraine conflict, inflationary pressures and manpower constraints, resulted in cost overruns and project losses.
However, noted was the group’s revenue which gained 46.4%yoy to RM797m in 1QFY23. For 6MFY23, revenue increased 43.7%yoy to RM1.51b. The higher revenue was attributable to the increased engineering, construction, and plant maintenance activities in both Malaysian and international operations.
Dialog’s ongoing projects in downstream Malaysia are still impacted by the COVID-19 pandemic, the war in Ukraine, inflationary pressures, and staffing shortages. These unfavourable events have severely disrupted the supply chain and raised material and labour costs which led to cost overruns and some project losses. Meanwhile, DIALOG Terminals Langsat and Pengerang continued to provide Dialog with a steady income stream, in addition to the higher crude oil prices. However, due to the higher financing and operating costs, the profit contributions from these terminals were lower. Nevertheless, the sale of specialised petroleum products and services to international buyers, as well as the advancement of engineering, construction, and maintenance activities in Singapore and fabrications in New Zealand, had contributed positively
to its performance.
As a leading integrated technical service provider that is diversified across the upstream, midstream, and downstream businesses of the energy sector, Dialog will remain focused and steadfast in the pursuit of its key long-term strategies. Dialog is now the 2nd largest independent terminal owner cum operator in Southeast Asia with a current operating capacity of RM20m. Challenges remain, however, which include: the availability of skilled manpower, technical expertise, and changes in the prices of materials.
In consideration that Dialog’s 2QFY23 earnings that came in below expectation, MIDF revised its FY23-FY24 earnings forecast downward by -11% and -12% respectively. As such, it also revises the target price to RM3.28 (previously RM3.70), by pegging a PER of 30.6 sen to an EPS23 of 10.7 sen. The PER is based on the group’s 5-year average PER.
The general outlook on the oil market is expected to be robust in 2023 as demand for oil recovers fully from the impact of the Covid-19 pandemic in China, as well as in EU, where energy is in high demand since the sanctions on Russian oil products. The house is maintaining its buy call on the stock and reiterates its positive stance on Dialog for the remainder of FY23.
