Dialog eyes investments in specialty chemical plants

10 Jan 2019

Source:The Star

PETALING JAYA: Dialog Group Bhd plans to make new investments in specialty chemical plants at the Pengerang Phase 3 project, according to CIMB Research.

The research house said, quoting Dialog's spokesperson, that the firm is in discussions with multiple global investors with Dialog potentially taking 20% to 30% stakes in these plants.

The specialty chemical plants at Pengerang Phase 3 are estimated to have an initial investment of about RM1.2bil.

"Petronas Chemicals Group Bhd's (PetChem) isononanol specialty chemical plant cost US$450mil to build.

A 20% investment in a similar-sized plant will cost Dialog US$90mil, and Dialog may invest in more than one plant," CIMB said in a report yesterday.

It estimates that Dialog may raise money through new shares next year if the firm decides to invest in at least two plants. It is worth noting that Dialog's only rights issue was in February 2012, when the firm raised RM476mil for its tank terminal business.

CIMB said that the majority of investors had expressed concerns that specialty chemical investments may be more risky, cyclical and volatile.

"Based on our discussions with investors, we suspect that some may take profit on Dialog's shares while waiting for further details on the potential specialty chemical investments.

"The near-term direction of Dialog's share price depends on the depth of its communication with investors and whether they can be convinced," it said.

However, CIMB pointed out that Dialog had a strong track record of taking calculated and rewarding risks.

Additionally, it reckoned that the specialty chemical plants are synergistic with Dialog's existing businesses.

"For instance, Dialog may be the engineering, procurement, construction and commissioning contractor for the plants, maybe positioned to perform the maintenance services over the entire useful life of the plants, and may provide dedicated storage tanks for longterm lease to the plants," it said. Shares in Dialog closed one sen higher to RM2.85 yesterday.