PETALING JAYA: Dialog Group Bhd aims to focus on businesses that provide recurring and long-term sustainable income to ensure stable growth in the future, said chairman and group managing director Ngau Boon Keat.
“We have moved from being an oil and gas (O&G) player focusing mainly on engineering and construction to an integrated specialist technical services provider,” he told StarBiz. “Focusing on businesses with recurring and long-term sustainable income ensures that our earnings continue to grow consistently.”
Recurring business models are preferred due to the steadier earnings flow and lucrative margins attached to long-term contracts spanning three to five years, according to Ngau.
Dialog would concentrate on the provision of centralised tankage facility (CTF) services, plant maintenance, catalyst handling services and specialist products and services divisions, he said. Engineering and construction together with the fabrication business will play supporting roles by providing their services mainly for in-house projects or to partners.
The most exciting division for the group currently is the CTF services division, which contributed some 30% to bottomline for the financial year ended June 30, 2009 (FY09) via Dialog’s CTF in Kertih, Terengganu, Ngau said.
The group’s Tanjung Langsat tank terminals in Johor, jointly developed with MISC Bhd and Trafigura Beheer BV, with a capacity of 400,000 cu m, are expected to be operational by month-end.
The joint venture has a 30-year concession from Trafigura for the blending, storage and distribution of petroleum products and by-products. Ngau expects Tanjung Langsat to start contributing to the group’s bottomline in one or two years.
Dialog also recently signed a memorandum of understanding with the Johor government and Vopak Asia Pte Ltd to study the feasibility of developing an independent deepwater storage terminal for oil products in Pengerang, Johor.
“The feasibility study should be ready by year-end while the environmental impact assessment may take some nine months. We are optimistic that the studies will start to bear fruit by the middle of 2010,” Ngau said.
Dialog also plans to grow its catalyst handling services overseas in newly penetrated markets such as Europe, United States, Middle East and South Asia. The division contributed about RM47.7mil to revenue in FY09.
MIDF Research said in a recent research note that revenue from the catalyst division would continue to be a solution for Dialog’s future growth.
“We believe catalyst solutions are still in demand as it increases the efficiency of the extraction and refinery process. Furthermore, contracts are secured on a long-term basis with margins of about 15% to 20%,” it said.
MIDF also expects demand for the company’s plant maintenance works to continue to rise supported by the increasing number of tank farms in the Middle East and existing ones in Singapore, which are due for annual maintenance works.
Dialog’s net profit rose 22% to RM92.2mil for FY09 versus FY08 while revenue broke the RM1bil mark to hit RM1.1bil, a jump of 39.7% year on year.
DIALOG : [Stock Watch] [News]