PETALING JAYA: Dialog Bhd deserves a premium valuation above its peers, given the group’s long-term recurring cash flow-generating businesses, says AmInvestment Bank Research.
This will be further underpinned by potentially substantive expansions in Johor’s Pengerang petrochemical and storage developments with a strong balance sheet that has low net gearing levels, it added.
The research house said Dialog is currently trading at an attractive financial year 2024 (FY24) forecast price-earnings of 17.4 times, which is well below its five-year mean of 31 times.
Following a recent meeting with the group’s management, AmInvest Research said: “The independent tank terminal business remains resilient amid the Red Sea crisis, as the operation is a net beneficiary of oil supply uncertainties.
“We gather that the utilisation rate is currently at 90% to 95% with monthly spot rates above S$6 per cu m, consistent with our expectations.”
For comparison, during the pre-pandemic period, Dialog Group
saw terminal utilisation rates at lower 70%-80% levels with monthly spot rates at S$4 to S$5 per cu m.
According to AmInvest Research, Dialog’s management is cognisant over the recent development for Maharani Energy Gateway (MEG) with the announcement of a maiden US$2bil (RM9.5bil) investment from China Engineering Corp for the construction of a combined-cycle gas turbine power plant and a green hydrogen and green ammonia plant in Muar, Johor.
This is expected to complement the existing plans for MEG, which consist of oil and gas storage and blending facilities, petrochemical plant and refinery; and floating terminal liquefied natural gas and regasification station offshore Muar, according to its proposed master plan.
AmInvest Research said: “Though visibility on MEG is scant, we believe the project does not pose an immediate threat to the group’s tank terminal business in nearby Pengerang.
“This is owing to its proximity to the Jurong Port in Singapore and the 55.6% composition of dedicated terminals to cater for Pengerang Integrated Petroleum Complex requirements.”
Meanwhile, Dialog has affirmed that it is still engaged in close discussions with prospective investors for Pengerang Phase 3 expansion plans.
“We understand from management that the remaining 300 acres of reclaimed land will be able to cater for up to two million cu m of storage capacity and construction works can be completed within 24 months (including the set-up of additional berths,” it added.
