KUALA LUMPUR: Dialog Group Bhd
's 2023 financial year could be looking brighter than earlier thought following some new considerations to the upside, says CGS-CIMB Research.
In a research note, the analyst said the group's oilfield maintenance was completed last quarter and production has returned to normal, leading to a sequential rebound in quarterly profits from the Bayan and D35 fields in 2QFY23.
In addition, Dialog has also been actively pursuing higher rates for its plant maintenance services that were secured under a 5-year master service contract with Petronas effective July 1, 2019.
"Margins have been squeezed due to the post-Covid-19 global inflation and manpower shortages, and Dialog is confident of obtaining higher rates for the remaining 1½ years of the contract," said CGS-CIMB.
Meanwhile, Dialog has revealed its independent terminal tank storage rates rose to S$6/CBM a month as at end-September 2022 while utilisation rates rose to almost 90%.
Dialog expects these metrics to remain stable over the months ahead.
Also leaving open the possibility for more upside, CGS-CIMB added that it had not yet factored in potential compensation from clients following the completion of loss-making EPCC projects.
After revising its numbers, CGS-CIMB reiterated its "add" call on Dialog with a target price of RM2.60, up from RM2.10 previously.
"We now think that Dialog has the potential to outperform our current FY23F core net profit forecast, which was reduced by 5.7% in our 15 Nov note," it said.
"Potential re-rating catalysts include stronger quarterly profits ahead. Downside risks include failure to receive higher rates or compensation for cost overruns.," it added.
