Dia­log eyes in­vest­ments in spe­cialty chem­i­cal plants

The Star Malaysia - StarBiz - - News -

PETALING JAYA: Dia­log Group Bhd plans to make new in­vest­ments in spe­cialty chem­i­cal plants at the Pengerang Phase 3 pro­ject, ac­cord­ing to CIMB Re­search.

The re­search house said, quot­ing Dia­log’s spokesper­son, that the firm is in dis­cus­sions with mul­ti­ple global in­vestors with Dia­log po­ten­tially tak­ing 20% to 30% stakes in these plants.

The spe­cialty chem­i­cal plants at Pengerang Phase 3 are es­ti­mated to have an ini­tial in­vest­ment of about RM1.2bil.

“Petronas Chem­i­cals Group Bhd’s (PetChem) isononanol spe­cialty chem­i­cal plant cost US$450mil to build.

A 20% in­vest­ment in a sim­i­lar-sized plant will cost Dia­log US$90mil, and Dia­log may in­vest in more than one plant,” CIMB said in a re­port yes­ter­day.

It es­ti­mates that Dia­log may raise money through new shares next year if the firm de­cides to in­vest in at least two plants.

It is worth not­ing that Dia­log’s only rights is­sue was in Fe­bru­ary 2012, when the firm raised RM476mil for its tank ter­mi­nal busi­ness.

CIMB said that the ma­jor­ity of in­vestors had ex­pressed con­cerns that spe­cialty chem­i­cal in­vest­ments may be more risky, cycli­cal and volatile.

“Based on our dis­cus­sions with in­vestors, we sus­pect that some may take profit on Dia­log’s shares while wait­ing for fur­ther de­tails on the po­ten­tial spe­cialty chem­i­cal in­vest­ments.

“The near-term di­rec­tion of Dia­log’s share price de­pends on the depth of its com­mu­ni­ca­tion with in­vestors and whether they can be con­vinced,” it said.

How­ever, CIMB pointed out that Dia­log had a strong track record of tak­ing cal­cu­lated and re­ward­ing risks.

Ad­di­tion­ally, it reck­oned that the spe­cialty chem­i­cal plants are syn­er­gis­tic with Dia­log’s ex­ist­ing busi­nesses.

“For in­stance, Dia­log may be the en­gi­neer­ing, pro­cure­ment, con­struc­tion and com­mis­sion­ing con­trac­tor for the plants, maybe po­si­tioned to per­form the main­te­nance ser­vices over the en­tire use­ful life of the plants, and may pro­vide ded­i­cated stor­age tanks for longterm lease to the plants,” it said.

Shares in Dia­log closed one sen higher to RM2.85 yes­ter­day.

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