Dialog susceptible to global uncertainties
KUCHING: Dialog Group Bhd's (Dialog) performance could be affected by global uncertainties as the company is exposed to volatile oil prices, geopolitical risks, inflationary pressures and others, analysts observed.
In a report, MIDF Amanah Investment Bank Bhd's research team (MIDF Research) remarked: “Being an integrated oil and gas company with diversification on every division within the oil and gas (O&G) sector, including sustainable and green energy, Dialog is at an advantage among its Energy Services peers.
“However, the vulnerable exposure towards oil price volatility, geopolitical risks, inflationary pressures on materials and manpower, and the ever-evolving consumer demand for crude products, petrochemicals and green fuel, puts the group at an uncertainty risk in 2024.”
Nonetheless, it opined that, with Dialog’s further plans to expand its storage farm and improving its EPCC operations, the risks could possibly be mitigated and lessened.
Meanwhile, on the company's recently released second quarter of the financial year 2024 (2QFY24) results, MIDF Research said its Malaysia front improved on higher production. 2QFY24 revenue rose up by 9.4 per cent y-o-y to RM480.1 million, while profit before tax added 25.3 per cent y-o-y to RM121.8m. Upstream continued to see more production in 2QFY24.
Its midstream activities remained a stable revenue stream given the improved occupancy rate in DIALOG Terminals Langsat and Dialog Terminals Pengerang (5).
Downstream remained eventful with various EPCC and plant maintenance projects. Some of these projects are nearing completion and as such, losses from these projects had been reduced significantly.
Its collective revenue for the international front for 2QFY24 gained 8.4 per cent y-o-y to RM374.7 million, while collective profit before tax surged 30.9 per cent y-o-y to RM55.4 million.
“The higher performance was contributed by activities at Jubail Supply Base, Saudi Arabia.
“The engineering, construction, fabrication and plant maintenance activities in Singapore, Australia and New Zealand, and sales of specialist products and services in various countries also contributed positively due to the improved business environment,” it said.
Despite the volatile oil prices anticipated in 2024, it pointed out that the group’s long-term diversification strategy into the development and production of oilfields is expected to contribute to its upstream segment.
“With Petronas’ capex expected to range between RM55 billion to RM60 billion in 2024 to 2026, we believe Dialog’s upstream endeavour will benefit from increased demand for engineering and specialist services to assist in field development projects,” it said.
Dialog is also one of the biggest independent terminal owner and operator in the Asean region.
“With its planned investments in adding capacity to its terminals for longer term storage as well as for renewable fuel storage, we believe Dialog is capable of sustaining its revenue stream through this segment.
“As we are expecting Brent crude oil price to hover in the average US$80 to US$83 per barrel range in 2024 with an upside of going above the average of US$87 to US$89 per barrel should geopolitical tensions escalate in the Middle East and Europe, as well as an increase in upstream activities moving forward, the demand for storage for either crude petroleum or petroleum products may be high in the near future,” it added.