Hot Stock Dialog falls 3% on Tg Langsat arbitration notice

by **Cals** Fri 11 Apr 2014, 14:32

Hot Stock Dialog falls 3% on Tg Langsat arbitration notice

Business & Markets 2014

Written by Jonathan Gan of theedgemalaysia.com

Friday, 11 April 2014 10:14

KUALA LUMPUR (Apr 11): Dialog Group Bhd fell as much as 3% after the oil and gas support-services provider said it received an arbitration notice from Tanjung Langsat Port Sdn Bhd (TLP).

TLP claimed that there were breaches in obligation from Dialog’s unit Dialog E&C Sdn Bhd under the engineering, procurement, construction and commissioning (EPCC) contract for an oil terminal at Tanjung Langsat Port, Johor.

At 9.41am, Dialog fell as much as 11 sen to RM3.58 with some 3.4 million shares done. The stock was the fifth-largest decliner across the bourse.

In a note today, Kenanga Research analyst Cezzane See said the firm was neutral on news of the arbitration notice.

“We are neutral on the news for now, as arbitrations typically take years to be settled. Furthermore, we believe it is premature to make any conclusion at this juncture,” said See.

However, See said there would be a knee-jerk reaction in Dialog's share price following the news.

See said Kenanga expected "there will be a negative knee-jerk reaction in its share prices given the quantum of the claims (2 times FY16E net profit and 6 times the original EPCC cost)”

Despite the negative news, Kenanga maintained its “outperform” rating on the stock with an unchanged target price of RM3.92.

Meanwhile, RHB Research Institute Sdn Bhd wrote in a note that TLP's potential claim at between RM546.6 million and RM561.2 million constituted about 37.5% to 38.6% of Dialog’s equity as of December 31, 2013.

"Pending clarification from the management, we maintain "buy" on Dialog with an SOP (sum-of-parts)-based FV (fair value) of RM3.71," RHB said.