KUALA LUMPUR (July 4): MIDF Research has maintained its positive stance on the oil and gas sector on hopes that contract flows will pick up soon – especially the bigger ticket items.
In a note Wednesday, MIDF Research said it was still placing its hope on the US$100 billion half-decade capex spending committed by Petronas and works for the North Malay Basin.
“In addition, we can look forward to the third risk service contract to be dished out in the near future,” it said.
The research house said Dialog remained the stock pick of the sector.
“The expansion of Langsat Terminal Two & Three and Tg. Pengerang Phase 1 are expected to lift Dialog’s Centralized Tankage Facilities (CTF)’ capacity by a massive +64% and +145% respectively, potentially doubling the company’s net profit by 2015,” it said.
“In fact, should we incorporate Dialog’s potential involvement in Pengerang re-gasification project and the contribution from Balai marginal oilfield development, our earnings forecasts as well as fair value are expected to be even higher,” it said.
MIDF Research said its target price of RM2.80 was based on Sum-of-Parts method.
The research house said its valuation was still conservative given that the implied PER13 of 23.3x is 0.5-standard deviation below its historical average since 2007.
“We continue to like Dialog on its strong double-digit earnings CAGR (FY11-FY13) of +26%. We also like Dialog’s management confident on the growth story of its CTF business in Pengerang, capitalising on the RAPID project,” it said.