Dialog aims to reduce volatility


18 Jan 2019

Source: The Star

PETALING JAYA: Dialog Group Bhd will focus on diversifying across the value chain with regard to its oil and gas business to reduce earnings volatility, according CIMB Research.

Quoting Dialog executive chairman Tan Sri Ngau Boon Keat, the brokerage noted that Dialog would continue to work towards integrating the upstream-midstream-downstream aspects of its oil and gas businesses.

"The underlying rationale is to reduce earnings cyclicality in the context of pursuing structural growth, as a cyclical upswing in one sector can offset a cyclical downswing elsewhere," CIMB Research said.

"A case in point is Dialog's exposure in upstream oilfield assets in Malaysia, whose profitability has declined in the past four months due to the oil price drop.

"However, this is being offset by better profits in the midstream space, with the return to almost full-utilisation at the Pengerang special purpose vehicle 1 independent terminal due to global crude oil overproduction," the brokerage wrote in its report following a meeting with the company.

CIMB Research maintained its "add" call on Dialog, with an unchanged target price of RM3.98.

In the upstream space, Dialog has a 20% share in the production sharing contract for three marginal fields offshore Sarawak, and a 50% interest in the oil service contract for the Bayan field, offshore Sarawak.

"Dialog continues to seek out new investment opportunities in offshore oil and gas fields, and while it is doing so, it is also looking for investment opportunities in the downstream petrochemicals space which may see higher profitability as oil prices declines due to lower feedstock costs.

In this way, Dialog is again working to mitigate earnings volatility across its portfolio," CIMB Research explained. 

PETALING JAYA: Dialog Group Bhd will focus on diversifying across the value chain with regard to its oil and gas business to reduce earnings volatility, according CIMB Research.

Quoting Dialog executive chairman Tan Sri Ngau Boon Keat, the brokerage noted that Dialog would continue to work towards integrating the upstream-midstream-downstream aspects of its oil and gas businesses.

"The underlying rationale is to reduce earnings cyclicality in the context of pursuing structural growth, as a cyclical upswing in one sector can offset a cyclical downswing elsewhere," CIMB Research said.

"A case in point is Dialog's exposure in upstream oilfield assets in Malaysia, whose profitability has declined in the past four months due to the oil price drop.

"However, this is being offset by better profits in the midstream space, with the return to almost full-utilisation at the Pengerang special purpose vehicle 1 independent terminal due to global crude oil overproduction," the brokerage wrote in its report following a meeting with the company.

CIMB Research maintained its "add" call on Dialog, with an unchanged target price of RM3.98.

In the upstream space, Dialog has a 20% share in the production sharing contract for three marginal fields offshore Sarawak, and a 50% interest in the oil service contract for the Bayan field, offshore Sarawak.

"Dialog continues to seek out new investment opportunities in offshore oil and gas fields, and while it is doing so, it is also looking for investment opportunities in the downstream petrochemicals space which may see higher profitability as oil prices declines due to lower feedstock costs.

In this way, Dialog is again working to mitigate earnings volatility across its portfolio," CIMB Research explained.