Positive on Dialog’s long-term prospects despite flat start
KUCHING: Dialog Group Bhd’s (Dialog) prospects have been viewed positively despite its flattish start to its financial year 2023 (FY23).
In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) noted that Dialog’s first quarter of FY23 (1QFY23) core net profit of RM133 million were within expectations.
On a year-on-year (y-o-y) basis, its 1QFY23 earnings grew a marginal three per cent.
“While revenue saw a strong recovery led by higher downstream EPCC and O&M activities, this was partially offset by cost overruns and project losses amidst higher material and labour costs, higher finance costs, and higher JV contributions from the completed acquisition of Pan Orient Energy,” it said.
Looking ahead, Kenanga Research pointed out that further developments of Pengerang Phase 3 will be Dialog’s key focus. Phase 3 is designated for dedicated terminals serving midto-long-term clients.
“With the start-up of Petronas’ Pengerang Integrated Complex (PIC), we believe this would help Dialog to expedite talks with potential partners.
“Dialog also has another 500 acres of land in the Pengerang area available for further developments in the longer-term.
“Meanwhile, with the current expansion of its Langsat Terminals now completed, Dialog still has another 17 acres of land in Langsat, which could potentially add another 200,000 cubic meters of storage capacity in the future – thus bringing Langsat’s total capacity to circa one million cubic meters,” it opined.
“Overall, despite the shortterm challenges, the group’s long-term outlook still remains largely intact, with its midstream assets to also provide a degree of earnings defensiveness and resiliency.
“That said, any further development of its Pengerang Phase 3 is expected to serve as a potential re-rating catalyst for the stock,” it added.
Meanwhile, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) pointed out that the economic environment is expected to remain challenging for Dialog.
Nevertheless, it said: “Being an integrated oil and gas company, we remain confident that the group will continue to focus on its long-term strategies and sustainable business model, against the risk of uncertainties on the global economy, crude oil prices and currency movements.”
It also believe its businesses will continue to be resilient amid the challenging economic environment.
“Considering that a stable oil price trend is expected for 2023, we opine that the group’s financial performance is on the right track.
“We are positive that Dialog will continue to strengthen its competitiveness via its storage tank farm business, international upstream operations, engineering and fabrication services, recycled PET production facility, and technology and digital transformation initiatives,” it said.