PDT development undergirds Dialog`s long-term growth prospects (KK)

PDT development undergirds Dialog`s long-term growth prospects
12 Jan 2018
Source: Borneo Post (KK)

Pengerang DeepwaterTerminal development, which undergirds Dialog G roup Bhd's (Dialog) long-term growth prospects has led to analysts reiterating a 'buy' on the stock

KUALA LUMPUR: Pengerang Deepwater Terminal (PDT) development, which undergirds Dialog Group Bhd's (Dialog) long-term growth prospects has led to analysts reiterating a 'buy' on the stock

Amlnvestment Bank Bhd (Amlnvestment Bank) recalled that the PDT development undergirds Dialog's long-term growth prospects as the group is currently securing new potential partners for Phase 3 and future phases, which will be part of the additional 1,000-acre zone comprising further reclaimable land and the adjoining 650-acre buffer zone.

"At the current stage, Dialog's footprint in Pengerang has expanded from the original plan of only 500 acres by 2.7-fold to 1,330 acres, catering to additional petrochemical, storage and support facilities which will be needed to support Petronas' nearby refinery and petrochemical integrated development (RAPID) project," the research firm noted.

Amlnvestment Bank highlighted that currently, the group's progress on the RM6.3 billion PDT Phase 2 is on track as the RAPID complex remains on schedule with progressive completion in 2018 to 2019.

It further highlighted that the RM2.7 billion liquefied natural gas (LNG) regasification plant and storage tanks, in which Dialog has a 25 percent equity stake, have been completed on November 1 last year and with full contribution from the second half of financial year 2018 (2HFY18) onwards.

"PDT phase 1 will expand by 33 per cent or 430,000 cubic metres of storage under phase IE, which will leave enough space for additional tanks with a capacity of 600,000 cubic metres.

"Also, Dialog will be leasing 35 acres of leasehold land from Johor Corp and acquire 100,000 cubic metres of additional storage tanks next to its Langsat Terminals 1 and 2.

"The group has further affirmed its intention to expand its currently dormant Langsat Terminal 3 into a 200,000 cubic metres storage facility," the research firm said.

Amlnvestment Bank noted that currently, Dialog is trading at a FY19F price earnings (PE) of 34-fold, below the group's five-year peak of 46- fold.

The research firm viewed the premium as justified given Dialog's long-term recurring cash flow-generating businesses, which are largely cushioned from volatile crude oil price cycles, and further underpinned by the strategic Pengerang development's revaluation dynamics.

Overall, Amlnvestment Bank reiterated its 'buy' recommendation on Dialog with a higher sum-of-parts-based (SOP) fair value of RM3.20 per share, from an earlier RM2.75 per share.