Dialog beat expectations, buoyed by Pegerang project

KUALA LUMPUR: Dialog Group Bhd (Dialog) made another record breaking quarter with core earnings breaching the RM100 million mark backed by stronger engineering, procurement, construction and commissioning (EPCC) earnings.

In a report, the research arm of Kenanga Investment Bank Bhd (Kenanga Research said, Dialog registered core net profit (CNP) of RM348.2 million in FY17 due to stronger-thanexpected contribution from the EPCC segment.

FY17 core earnings also jumped 22 per cent. It said, Dialog’s core earnings went up by 10 cent quarter on quarter (q-o-q) to RM103.5 million in 4Q17 in tandem with a six per cent increase in revenue, thanks to stronger EPCC segment with its on-going projects.

Year-on-year (y-o-y)-wise, CNP also jumped by 42 per cent from RM72.8m in tandem with 35 per cent stronger top-line boosted by higher work orders from EPCC and fabrication segment, specialist products & services, and plant maintenance & catalyst handling services.

“Cumulatively, CNP also rose by 22 per cent on the abovementioned reasons coupled with better contribution from JV and associates,” it added.

With the successful delivery of Phase 1 and good progress for Phase 2, Dialog is already in the midst of securing new potential partners for Phase 3 to build more petroleum and petrochemical storage terminals.

With the remaining unutilised 200-300 acres of land, Dialog could construct storage terminals of up to five million m3 within the next five to 10 years in different phases.

It would be a mixture of dedicated and independent storage terminals and the percentage of equity stake is yet to be firmed up at this juncture.

“We also do not discount the possibility of Dialog building and owning 100 per cent of a portion of the additional capacity if its financials are in a comfortable position,” it said.

All in, it upgraded FY18 to FY19E earnings by three per cent after factoring in higher revenue from both fabrication segment and stronger specialist products and services division.

It maintained a ‘market perform’ call on the stock. It noted that potential rerating catalysts in the near term are the Phase 1 independent terminal expansion for additional one million m3 capacity which would give additional RM0.12 per share to its sum of parts valuation, and materialisation of Pengerang Phase 3.

Meanwhile, the research arm of AmInvestment Bank Bhd (AmInvestment) said 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.

Additionally, it said, the RM2.7 billion LNG regasification plant and storage tanks, in which Dialog has a 25 per cent equity stake, are scheduled for progressive completion starting in 4Q17 to 2Q18.

It also pointed out that the 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 800-acre zone comprising further reclaimable land and the adjoining buffer zone.

“This caters to additional petrochemical, storage and support facilities which will be needed to support Petronas’ nearby RAPID project,” it added.