However, the oil and gas services firm said the higher revenue from these projects was partially offset by lower sales in specialist products and services.
KUALA LUMPUR: PublicInvestment Bank Research (PIVB) has reaffirmed its Outperform for Dialog Group
with a target price of RM2.15 – which is 10.2% above Wednesday’s closing price of RM1.95 – underpinned by its Pengerang Deepwater Terminal (PDT) project.
It said on Thursday the current PDT phase one and current construction of phase two has led to the securing of new potential partners for phase three. This will include the development of more petroleum and petrochemical storage terminals.
“PDT will furthermore provide more opportunities for the group to leverage on its core activities of engineering, construction, fabrication and plant maintenance services,” it said.
PIVB Research visited Dialog’s PDT recently and it was encouraged by the positive progress updates.
Dialog Group’s next milestone - SPV3, the RM2.7bn Liquefied Natural Gas (LNG) regasification facilities in which it has partnered with Petronas Gas and the Johor State (S.S.I) has completed pre-commissioning tests and will be receiving its first cargo on Aug 26.
This is ahead of the initial completion date targeted for end-2017.
SPV3’s contributions will flow through as associate earnings and reflected from 4QCY17 onwards, through Dialog’s 25% shareholding.
“We like the prospects of this project, as the contract is on a take or pay basis, with an expected internal rate of return (IRR) of 10% for the duration 25 years (+25 years option),” it said.
PIVB Research cited a recent Bloomberg report on an interesting new development in the oil market – an offshore supermarket in and about the Straits of Malacca.
This new strategy now means that traders are less beholden to the uncertainties of futures prices.
At the request of buyers, they can supply as little as 100,000 barrels of oil from tankers for delivery in Asia within a week.
“For Dialog, considering its refinery operations are strategically located along the Johor Straits, we anticipate would see benefits from the greater proliferation of this development spurred by continuous storage and refining demands from clients of these nearby form of retailing.
“The group is also poised to develop the buffer zone, 600 acres of total reclaimable land between its current phases and the Johor mainland.
“We believe SPV 4 and also the future phase (Figure 1) are in the Group?s plans to be revealed in the mid-term.
“To recap, our view on Dialog’s re-rating is premised on i) LNG regasification facilities (4QCY17) and the dedicated industrial terminal to Petronas (1QCY19) to commence operations at their respective stages, ii) Petronas’ unwavering commitment to downstream activities, in particular the PIPC, which dispels any progress uncertainties, and iii) outlook on oil price stabilisation at US$50 a barrel,” it said.
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