KENANGA Research has an "outperform" call on Dialog Group due to earnings boost from a joint-venture (JV) and is placing a higher target price of RM3.92.
Despite a poor showing in the first half of the year, the group's second-quarter core net profit of RM66.4 million increased its second half net profit to RM114.1 million, well above the research house's expectations at 51.7 per cent of RM220.8 million, but still within consensus at 45 per cent of a full-year's forecast.
Kenanga believes it may have been too conservative in the JV forecast, given the group's stellar performance in the quarter.
"We are accelerating the Pengerang earnings to financial year 2014 (versus FY15). We assume around 15 per cent utilisation rate, which raises our JV projections to RM63.8 million from RM47.8 million previously. This lifts our net profit forecast by 5.8 per cent for this year.
"We introduced FY16 net profit forecast of RM286.3 million as we roll forward our target price base to calendar year 15 (versus previous CY14) given that investors have a longer-term view for the sector, going forward.
"The minimal growth of two per cent for now is largely due to deferred contributions from Ba-lai and the LNG capacity enhancements in Pen-gerang, potentially only coming in by FY17."