Positive on Dialog’s MOU to mark Pengerang Deepwater Terminal Phase 3

KUCHING: Dialog Group Bhd’s (Dialog) recent Memorandum of Understanding (MOU) to mark the launch of Pengerang Deepwater Terminals Phase 3 has garnered all-round positive reactions from analysts.

To note, Dialog via wholly owned subsidiary Dialog Pengerang Sdn Bhd, the State Government of Johor Darul Ta’zim and, the State Secretary, Johor (Incorporated) (SSI), entered into a MOU last week.

“Phase 3 will be developed on approximately 300 acres of land next to Phase 2 within the Pengerang Deepwater Terminals,” the group said in a statement.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) was positive on this move as it marked the launch of the long-awaited Phase 3 development. Kenanga Research believed the entire 300 acres land could add storage terminals of five million to six million cubic metres (m3) but the initial construction phase should only build circa two million m3.

“Dialog has yet to finalise its joint venture (JV) partner, the respective stake and source of funding for the storage terminals,” the research arm said.

“While it takes another 12 to 18 months to build the storage terminals, the earnings from these facilities could only start contributing earliest by financial year 2022 (FY22).”

As such, Kenanga Research kept its estimates unchanged as the timeline was rather within the research arm’s expectations and the storage terminals development had yet to be finalised.

Meanwhile, AmInvestment Bank Bhd (AmInvestment Bank) remained convicted of Dialog’s embedded value largely anchored by its Pengerang development, following the MoU with the Johor state.

According to AmInvestment Bank, Deepwater 3’s common facilities – including the jetty – could amount to 30 per cent to 40 per cent of the initial investment cost.

The research firm expected the subsequent investments by other JV partners to reduce Dialog’s stake while boosting Phase 3’s total investment value given that Phase 2 has already reached RM7.8 billion in a reclaimed area which is half the size of Phase 3.

“To date, Dialog has reclaimed 440 acres of land, of which Phase 1 occupies 150 acres while Phase 2 will be located on 157 acres. As such, the group has already reclaimed 44 per cent of the earmarked 300 acres for Phase 3.

“There is an additional 73 acres, which will expand the total reclaimed area to 680 acres, excluding the adjoining 650 acres of buffer land and industrial estate,” the research firm said.