CIMB Equities Research expects Dialog Group Bhd to deliver strong earnings growth from next year onwards.
KUALA LUMPUR: Maybank Investment Bank Research has raised the target price for Dialog Group Bhd
from RM2.63 to RM3 and it is maintaining its Buy call for Malaysia’s largest, most profitable and most efficiently-run tank terminal operator.
The research house said on Wednesday it remained an enthusiast of Dialog’s business and management.
“Demand for tank terminal facilities in Asia is rising and Dialog has the right resources to leverage on this opportunity pre-post RAPID,” it said.
RAPID is Petronas’ Refinery and Petrochemical Integrated Development (Rapid) project in the Pengerang Integrated Petroleum Complex (PIPC).
“This would crystalise its untapped capacity potential (14m cu m) at Pengerang over time. We now incorporate 3m cu m of new capacity into our TP (vs. 1.25m cu m previously),” it said.
Maybank Research pointed out Dialog has the capability to quadruple Pengerang’s capacity.
Petronas’ RAPID US$27bil refining, petrochemical & associate’s facilities, (construction is 84% completed to-date), has directly benefitted Dialog and will continue to do so post-3Q18 commercialisation.
“On completion, we see RAPID as a catalyst to the: (i) expansion of downstream activities and (ii) attraction of new investments (i.e. petrochemicals/refining), making it a viable petrochemical hub in Asia.
“Dialog has the resources (i.e. land, track record) to tap onto this opportunity, offering its tank terminals expertise there. To-date, it only used up 307 acres of land for a 4.2m cu m capacity, which makes up only 23% of its optimal capacity (1,330 acres of reclaimed/ buffer land & industrial estate),” it said.
Maybank Research said Pengerang will offer Dialog a secular growth. Our financial model now incorporates a higher new capacity at Pengerang (3m cu m vs. 1.25m cu m previously, based on a 25% stake of Phase 3), which adds 34sen/share to NPV estimates.
“In total, we have incorporated 7.2m cu m for Dialog’s capacity at Pengerang. Based on land size alone, its storage capacity could reach an optimal 18m cu m in the long term, we estimate.
“Dialog’s 20-year concession for its 30%-owned Kertih Centralised Tankage Facility (KCTF; 400,000 cu m storage capacity) will end in 2020.
“While we do not rule out an extension, there is a possibility that the rates could be revised lower. KCTF contributes about RM30mil per annum to group’s earnings,” it said.
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