Dialog’s PDT Phase 2 progress on track - The Edge Financial Daily

Dialog’s PDT Phase 2 progress on track
25 Sep, 2017
Source: The Edge Financial Daily


Dialog Group Bhd
(Sept 21, RM 2.00)
Maintain buy with a higher fair value (FV) of RM2.45: Our higher FV valuation of RM2.45 is driven by: i) assumptions of an additional one million cubic metres of storage for Dialog Bhd’s 45.9% stake in Pengerang Deepwater Terminal (PDT) Phase 1; ii) assuming that Phase 3, which Dialog is still in the process of negotiating with off -takers, will have the same storage capacity and equity stakes as Phase 2’s 2.1 million cubic metres; and iii) raising the valuation of Pengerang land from RM30 per square foot (psf) to RM50 psf for Dialog’s estimated stake of 65% in the larger 650-acre (263.05ha) industrial and buff er zone.

We also raise Dialog’s financial year 2018 (FY18) to FY20 earnings by 5% to 8%, incorporating higher contributions from Pengerang Phase 1 and an increase of RM100 million for the group’s FY18 to FY20 engineering, procurement and construction order book assumption.

The RM5.5 billion contract for the construction of the RM6.3 billion PDT Phase 2 currently occupies Dialog’s fabrication, engineering and construction division, and underpins the group’s earnings over the next two years. The progress of PDT Phase 2 is on track as the refinery and petrochemical integrated development (Rapid) complex remains on schedule with progressive completion in 2018 to 2019. Additionally, the RM2.7 billion liquefied natural gas regasification plant and storage tanks, in which Dialog has a 25% equity stake, are scheduled for progressive completion starting in the fourth quarter of 2017 (4Q2017) to 2Q2018.

The overall Pengerang 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 an additional 890-acre zone comprising further reclaimable land and the adjoining buff er zone. Th is caters to additional petrochemical, storage and support facilities which will be needed to support Petroliam Nasional Bhd’s nearby Rapid project. Currently, 440 acres, which account for 65% of the reclaimable land area of 680 acres, has been developed.AmInvestment Bank, Sept 21

Dialog Group Bhd

FYE JUNE (RM MIL) 2017 2018F 2019F 2020F
Revenue 3,392.9 3,575.4 3,753.0 3,948.3
Core net profit 348.2 373.3 422.8 467.6
FD CORE EPS (sen) 6.2 6.6 7.5 8.3
FD core EPS growth (%) 4.9 7.2 13.3 10.6
Consensus net profit   380.3 420.8 483.0
DPS (sen) 2.7 2.7 2.9 3.2
PER (x) 32.4 30.2 26.7 24.1
EV/Ebitda (x) 23.4 20.9 19.5 18.2
Dividend yield (%) 1.3 1.3 1.5 1.6
ROE (%) 13.4 11.6 12.2 12.5

Sources: AmInvestment Bank