Financial Times

Calls make Dialog richer ‘minute by minute’ - broker
Stockbrokers predict that Dialog IPO will get oversubscribed by at least two times with possibilities of the share trading at Rs13.50 – Rs15.00 in the secondary market.

“Dialog has a successful business model where the focus is on revenue and margin per minute, where every minute of air time used will make Dialog richer minute by minute,” stockbrokers SC Securities said in a research report.
SC Securities called Dialog “a cash cow company with a balance of Rs 3.1 billion.”

In a post IPO world, Dialog will have a forward PE multiple of 16 times at Rs. 12.00 level making it look expensive, the brokers said. “But, when looking at the forward forecasted sector PE of 15.8 it seems fair. Dialog has a return on capital employed (ROCE -1st quarter ended) of 48 percent compared to 30 percent for the corresponding period in FY2004 while the return on shareholder equity increased from 64 percent in 2004 to 91 percent in 2005.”

The company made a net profit after tax of Rs 1.7 billion for the first quarter ended March 31, 2005 and its profits shot up by 66 percent when compared with the first quarter 2004 results (Rs 1.03 billion).

The brokers said globally mobile penetration rates increase very rapidly and mobile telephony seems to be overtaking the fixed line services. The telecom sector in Sri Lanka has low penetration levels compared to global standards.
Telecom and mobile penetration levels stood at mere 16.39 percent and 11.40 percent in 2004, which means that the local mobile telecommunication industry exhibits substantial growth potential.

Declining trends in handset prices, mobility, value added services, and minimisation of tariff related entry barriers through the introduction of pre-paid services which means less commitment has also contributed towards the industry to grow at a rapid rate of 50 percent compounded annual growth rate since year 2000- 2005.

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