Pengerang terminal lifts Dialog’s prospects

Kenanga Research said Dialog’s earnings are on an upward trajectory.

PETALING JAYA: Analysts are positive about Dialog Group Bhd’s latest second-quarter results for the financial year 2024 (2Q24), which came in within their expectations.

The leading integrated technical service provider for the energy sector raked in core net profit of RM145.8mil, up 6% quarter-on-quarter and a rise of 13% year-on-year, respectively.

According to Maybank Investment Bank Research (Maybank IB Research), developing the Pengerang Deepwater Terminal (PDT) in Johor to its full potential will be the key catalyst to Dialog’s long-term growth.

“We continue to like Dialog for its operational and financial stability from its dedicated midstream tank-terminal assets,” the research house said in a note to clients yesterday.

Furthermore, recent news flows have highlighted the potential entry of Rongsheng Petrochemical of China with an estimated commitment of RM80bil for a refining facility in the area. ChemOne from Singapore is also reported to be interested in building a condensate splitter and it plans to produce up to 2.3 million tonnes of aromatics annually in Pengerang.

“These foreign direct investments (FDIs) will likely benefit Dialog due to the need for storage for crude, distilled and refined products and engineering, procurement, construction and commissioning (EPCC) expertise,” Maybank IB Research added.

Based on its findings, the research house said Dialog’s independent tank terminal utilisation rates continued to be stable at more than 90% with increased rates at over S$6.5 per cubic metre per month in 2Q24 from over S$6 in 1Q24.

“The group expects rates to hover around current levels in the second half of FY24 (2H24) and FY25,” it noted.

Hence, Dialog is expected to continue enjoying long term, healthy and sustainable cash flows from its midstream tank terminal assets, said Maybank IB Research.

The research house has maintained a “buy” call on the stock with an unchanged target price (TP) of RM2.43.

Meanwhile, Kenanga Research said Dialog’s earnings are on an upward trajectory, buoyed by improved occupancy rates at its Langsat terminals, also in Johor, and enhanced performance in the upstream segment, notably in production.

The company has also seen an easing of cost pressures, with operating expenses growing by a manageable 4% in 1H24.

“Furthermore, the completion of legacy EPCC contracts, which had previously suffered from unfavourable cost bases, marks a significant step towards stabilising its financial outlook,” Kenanga Research noted.

The research house also likes Dialog for its resilient earnings from non-cyclical businesses such as operation of storage facilities and plant maintenance, its earnings growth and diversification driven by the forays into upstream investments, including production assets and its strong track record in project execution.

The brokerage firm maintained an “outperform” call on Dialog with a TP of RM3.10.