PDT development undergirds Dialog’s long-term growth prospects
KUCHING: Pengerang Deepwater Terminal ( PDT) development, which undergirds Dialog Group Bhd’s (Dialog) longterm growth prospects has led to analysts reiterating a ‘ buy’ on the stock.
AmInvestment Bank Bhd (AmInvestment Bank) recalled that the PDT 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 the additional 1,000-acre zone comprising further reclaimable land and the adjoining 650-acre buffer zone.
“At the current stage, Dialog’s footprint in Pengerang has expanded from the original plan of only 500 acres by 2.7-fold to 1,330 acres, catering to additional petrochemical, storage and support facilities which will be needed to support Petronas’ nearby refinery and petrochemical integrated development ( RAPID) project,” the research firm noted.
AmInvestment Bank highlighted that currently, 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.
It further highlighted that the RM2.7 billion liquefied natural gas ( LNG) regasification plant and storage tanks, in which Dialog has a 25 per cent equity stake, have been completed on November 1 last year and with full contribution from the second half of financial year 2018 (2HFY18) onwards.
“PDT phase 1 will expand by 33 per cent or 430,000 cubic metres of storage under phase 1E, which will leave enough space for additional tanks with a capacity of 600,000 cubic metres.
“Also, Dialog will be leasing 35 acres of leasehold land from Johor Corp and acquire 100,000 cubic metres of additional storage tanks next to its Langsat Terminals 1 and 2.
“The group has further affirmed its intention to expand its currently dormant Langsat Terminal 3 into a 200,000 cubic metres storage facility,” the research firm said.
AmInvestment Bank noted that currently, Dialog is trading at a FY19F price earnings ( PE) of 34-fold, below the group’s fiveyear peak of 46-fold.
The research firm viewed the premium as justified given Dialog’s long-term recurring cash flow- generating businesses, which are largely cushioned from volatile crude oil price cycles, and further underpinned by the strategic Pengerang development’s revaluation dynamics.
Overall, AmInvestment Bank reiterated its ‘ buy’ recommendation on Dialog with a higher sum- of-parts- based ( SOP) fair value of RM3.20 per share. from an earlier RM2.75 per share.
Even though Dialog’s share price has continually outperformed the FBM KLCI by 50 per cent last year and achieved our fair values multiple times, the research firm maintained its conviction that the stock’s multi-year re-rating process remains intact. While its earnings forecasts were unchanged, AmInvestment Bank raised Dialog’s SOP, partly with the inclusion of a 373- acre reclaimable land in Pengerang at RM50 psf.
“This is the balance of the total reclaimable land of 680 acres following the completion of Pengerang 1 (150 acres) and Pengerang Phase 2 (157 acres) by 2019.