Newly commissioned terminals boosted Dialog’s earnings in 2QFY20
KUALA LUMPUR: Oil and gas player Dialog Group Bhd (Dialog) continues to see an improvement in its financial performance for its second quarter of financial year 2020 (2QFY20), boosted by its newly commissioned Dialog Terminal Langsat 3.
MIDF Amanah Investment Bank Bhd (MIDF Research) saw that Dialog’s 2QFY20 normalised net profit came in at RM158 million. This was within the firm and consensus’ full-year earnings estimates at 52.2 and 49.9 per cents respectively.
Comparing against 2QFY19, its normalised earnings grew by 15.5 per cent year on year (y-o-y). This was despite registering a flat revenue year-over-year.
“However, on a quarterly sequential basis revenue contracted marginally by 5.2 per cent whilst earnings declined slightly by four per cent respectively,” said MIDF Research in its analysis yesterday. “This was driven by improved performance from its local operation, mainly derived from its downstream plant maintenance services.
“International operations posted higher profit. The improved performance from its international operations during the quarter has helped to boost earnings.”
Dialog’s international operations recorded a higher net profit after tax during the quarter led by its Middle East operation, it observed.
The higher net profit was mainly attributed to higher engineering, construction, fabrication and plant services activities as well as an increase in specialist products and services sales.
“We noted that the quarter also saw better contribution from Dialog Terminal Langsat 3 partialcommissioning of its 115,000-cubic metre storage facility.
“Recall that Dialog Terminal Langsat 3 was partially commissioned back in August 2019. However, we understand that while there was contribution from Dialog Terminal Langsat 3, it was still minimal as of end 2QFY20 as it was only fully commissioned in January 2020.”
Kenanga Investment Bank Bhd (Kenanga Research) in a separate note affirmed that Pengerang will remain a key growth driver for Dialog Group.
“In Pengerang, land reclamation works for Phase 3 has been completed, and is on track for a midCY21 commencement,” it said in a separate note.
“Phase 3A will first kick off with its long-term storage agreement with BP Singapore for a capacity of 430,000 cubic metres with securing of more clients down in the pipeline.
“Eventually, we believe Phase 3 would operate with a capacity of about three million cubic metres. Beyond that, Dialog has also another 500 acres of land within the Pengerang area available for future development.”
In the more immediate term, Langsat 3 has just commenced full operations with 120,000 cubic metres storage facility in January 2020, which bode well for its upcoming quarters.
Kenanga Research believed that Dialog has long-term plans to eventually expand Langsat 3 into a 300,000 cubic metre storage facility.
Looking forward, AmInvestment Bank Bhd (AmInvestment Bank) expect a stronger 2HFY20F with the maiden contribution from its 1.3mil m3 storage facilities in Pengerang Phase 2, which has been recently completed together with 120,000 m3 capacity from Tanjung Langsat 3.
“Additionally, the group’s expanded plant turnaround and maintenance work scope from Petronas’ 5year group-wide master service agreement is likely to propel nearterm earnings momentum,” it said in a separate note.