Highlights

Research houses mixed on Dialog's FY23 earnings prospects

 Publish date: Thu, 17 Nov 2022, 9:41 AM

KUALA LUMPUR: MIDF Research has slashed Dialog Group Bhd's earnings estimates for the financial year 2023 and 2024 (FY2023 & FY2024) by -2.0 per cent and -2.5 per cent respectively, in view of its first quarter (Q1) FY2023 results and the current volatility in the oil market.
 
It also revised downwards the oil and gas company's target price (TP) from RM3.96 to RM3.70.
 
The research house said Dialog earnings dropped by -2.4 per cent year-on-year (y-o-y) but gained +6.4 per cent quarter-on-quarter (q-o-q) to RM125.8 million, which came in below its expectation at 18 per cent of full-year forecast and consensus' at 21 per cent.
 
The lower on-year earnings were due to higher project and operation costs, as well as the share of profit from newly acquired joint venture company Pan Orient Energy (Siam) Ltd.
 
Nevertheless, the group reported a surge in revenue by +40.8 per cent y-o-y and +5.3 per cent q-o-q to RM711.7 million attributable to increased activities in local and international operations.
 
"The economic environment is expected to remain challenging for Dialog but we remain confident that the group will continue to focus on its long-term strategies and sustainable business model against the risk of uncertainties in the global economy, crude oil prices, and currency movements," it said in a note.
 
Meanwhile, Maybank Investment Bank Bhd retained Dialog's earnings forecasts for stronger quarters ahead, arising from higher upstream profits.
 
It sees Dialog achieving a core net profit of RM605 million and RM658 million for FY2023 and FY2024.
 
It believes Dialog's y-o-y growth in FY2023 will be fueled by the contribution of its 100 per cent-owned producing, upstream, onshore oil field asset in Thailand, Pacific Orient Energy Corp (POEC), and lower operating expenditure as the pandemic-led and supply chain issues dissipate.
 
"Based on our back-of-envelope calculations, the expected payback period for POEC is relatively low, at two to four years, based on a conservative crude oil profit of US$10-US$20 per barrel.
 
Kenanga Research also made no changes to Dialog's FY2023-FY2024 numbers.
 
"Dialog's Q1 FY2023 results were largely flattish, coming in within expectations. While revenue was boosted by higher downstream activities, cost overruns continued to drag earnings.
 
"Going forward, we believe the group's long-term prospects remain largely intact, with further developments on Pengerang Phase 3 to act as a potential re-rating catalyst," it said.
 
Kenanga Research maintains an outperform call on Dialog with a TP of RM3.10 per share.
 
 
 
 - Bernama
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