Dialog launches Phase 3 of Pengerang Deepwater Terminals

Dialog launches Phase 3 of Pengerang Deepwater Terminals
9 April 2018
Source: The Malaysian Reserve

DIALOG Group Bhd has entered into various memoranda of understanding (MoUs) to advance the Phase 3 of the Pengerang Deepwater Terminals (PDT). Holding a larger 80% stake than the previous phases, this solidifies the long-term prospects of the group and affirms our 'Outperform' call on the stock.

Our target price is raised to RM3.23 (previously RM2.89) as we conservatively account this into our valuations, though we leave earnings estimates unchanged for now, given that the project will only commence in about two years.

Near-term growth will continue to be driven by increased contributions from the Langsat Terminals and its other PDT project phases. Phase 1 has been successfully completed, while Phase 2 is partially operational but expected to operate in full in early 2019.

Phase 3 will be developed on land to be reclaimed next to Phase 2, covering about 300 acres (121.41ha) and will comprise: 1) common tankage facilities (including shared infrastructure) and deepwater marine facilities; 2) development of more petroleum and petrochemical storage terminals for medium-to long-term customers; and 3) development of industrial land for further downstream oil and gas-related activities.

Expected to cost about RM2.5b, the project will take about 22 months to complete. An MoU has been signed with the Johor government via Permodalan Darul Ta'zim Sdn Bhd to advance the development of this project.

Dialog, through Dialog Terminals Sdn Bhd, will hold an 80% equity interest in the venture, with the state government holding the remaining 20%. Separately , th e group awarded the engineering , procurement and construction works for the reclamation, soil improvement and shore protection works to Penta-Ocean Sdn Bhd. Works will take about 22 months, and cover land reclamation of about 300 acres next to the current Phase 2 site.

Dialog's ongoing PDT operations, which have 1.3 million cu m under Phase 1, is on course to see capacities expanded by an additional of 300,000 cu m. Phase 2 is on track for- completion early next year, while a partner has now been secured for Phase 3.

Having recently increased its stakes in Langsat Terminal (Tl) and T2, both engaged in the provision of centralised tankage and terminal facilities in Tanjong Langsat, the group is also planning to expand Langsat T3 into a 300,000 cu m storage facility. With a handy RM1.4b war chest, the group remains on the lookout for viable production assets for possible acquisitions, solidifying its earnings growth prospects for the longer term.