Dialog’s 2QFY24 results came in within expectations and as such, Maybank IB says it makes no change to its FY24-26E earnings forecasts and SOP-based TP of MYR2.43. The house continues to like Dialog for its operational/financial stability
from its dedicated midstream tank terminal assets. Developing Pengerang to its full potential remains its key agenda.
After a strong showing in 1QFY24, Dialog continued to show strength in operational performance as it raked in a core net profit of MYR145.8m (+6% QoQ, +13% YoY), bringing 1HFY24 to MYR283.6m (+8% YoY). The results came in in-line at 51% of and 49% of consensus FY24E. The QoQ strength was mainly due to higher group margins as some of the loss-making legacy EPCC contracts signed during the pandemic continued to gradually lapse, resulting in narrowed losses in the group’s downstream segment. The house believes that all of the legacy lossmaking contracts will be gradually phased out by 2Q-3QCY24. With that, Maybank IB said it should see a sustained strong performance from Dialog in 2HFY24. Tank terminal rates trended upwards in 2QFY24 Based on findings, the house notes that Dialog’s independent tank terminal utilisation rates continued to be stable at >90% with increased rates at SGD6.5/m3/month in 2QFY24 (from >SGD6.0/m3/month in 1QFY24). The group expects rates to hover around current levels in 2HFY24 and FY25.
The house is of the view that Dialog will continue to enjoy LT, healthy and sustainable cashflows from its midstream tank terminal assets. However, it recorded a decline in JV & associates contribution (-23% QoQ) due to a recognition of a non-cash deferred tax entry amounting to approximately c.MYR20m in 2QFY24.
Key catalyst for LT growth will still be Pengerang. Developing Pengerang to its full potential remains a key catalyst for Dialog’s LT growth. Recent news flows have highlighted the potential entry of Rongsheng Petrochemical with an estimated commitment of MYR80b for a refining facility; and ChemOne to build a condensate splitter and it plans to produce up to 2.3m tonnes of aromatics annually in Pengerang.
These FDIs will likely benefit Dialog due to the need for storage of crude/distilled/refined products and EPCC expertise.
