Maybank Research retains ‘buy’ call on Dialog

KUALA LUMPUR: Maybank Investment Bank Research is retaining its “buy” call on Dialog Group and the RM3 target price for Dialog Group as Petroliam Nasional’s (Petronas) planned upgrade of its Kerteh refinery is a positive for the company.

The research house said the upgrade ensures the extension of Dialog’s 30%-owned Kertih Centralised Tankage facility (KCTF) concession beyond 2020, a concern and a risk in the past.

“Overall, we remain an enthusiast business and management.

“Dialog is at the forefront to leverage on the demand for storage facilities in SEA, with its development at Johor (Pengerang and Tanjung Langsat).

“Our target price is sum-of-parts based,” it said.

Maybank Research said Petronas plans to upgrade its refinery in Kerteh, Terengganu by 2022 to produce higher quality fuel and expand the crude type it processes beyond Tapis.

Petronas Penapisan (Terengganu) MD & CEO Zabidi Ahmad said at a Platts Conference recently that production of light sweet Tapis crude is declining.

Hence, Petronas is looking to switch to other grades such as medium-sweet Kimanis and processing different condensates, such as the Australia’s North West Shelf, Iran’s South Pars or Qatar’s DFC.

The Kerteh upgrade, which would be completed by 2022, will allow the refinery to produce fuels that meet Euro V standard specifications although the capacity will remain unchanged.

The refinery’s primary units are a crude distillation unit and a condensate splitter.

“The upgrade of the refinery is a positive development for Dialog.

It is an indication that the concession for its 30%-owned Kertih Centralised Tankage facility, which will end in 2020 will be extended, albeit with a possibility that the existing rates would be re-negotiated.

“In our view, the capacity at KCTF will remain unchanged. KCTF contributes about RM30mil per annum to the group’s earnings.

“We see progress in its tank terminal businesses,” the research house said. of its