KUALA LUMPUR: CGS International (CGSI) Research said there is a potential re-rating catalyst for Dialog Group Bhd
as the drought of contracts it previously faced has ended.
In a stock exchange filing yesterday, Dialog said it would be expanding its storage facilities at the terminals for an additional 150,000cbm, dedicated for the storage of renewable and petroleum products.
It said 100,000cbm of the new capacity would be taken up by EcoCeres via a take-or-pay agreement for six years, while the balanced 50,000cmb has yet to see any off-takers.
Regarding the development as a win, CGSI said Dialog is poised to sign other tank terminal leases in the foreseeable future.
According to the research firm, a potential lease could come from Indonesia's ChemOne, which is preparing to build a new 150,000 bpd condensate refinery at Pengerang to produce paraxylene and transport fuels. CGSI estimates this project may be ready by 2029.
Another prospective tank terminal lease could come from PETRONAS’ US$1.3bil 650,000 tpa (13,000 bpd) biorefinery at Pengerang, for which construction will begin in 4Q24 and operations, by 2H28.
Meanwhile, CGSI said other re-rating catalysts include faster-than-expected progress in securing new customers at Dialog’s Phase 3 of the Pengerang Deepwater Terminal (PP3) and the launch of new development phases at PP3 and Langsat 3.
"Dialog also has the potential for better FY25F results as it has renegotiated upward its plant maintenance rates and its legacy loss-making EPCC projects have also been completed," it added.
The research firm maintained its "buy" call on Dialog with an unchanged target price of RM3.05.
Separately, Hong Leong Investment Bank (HLIB) Research said the expansion of Terminals Langsat will be a positive contribution to Dialog's recurring income stream, while diversifying its terminals operations to cater for renewable fuel products.
HLIB said it viewed the recent announcement positively, adding that renewable fuel terminals typically command 30-50% higher rates than their conventional counterparts.
"Our calculations suggest that this expansion will contribute RM18.3mil/RM19.3mil to Dialog’s FY27/28 earnings.
"Based on WACC of 7%, we arrive at an NPV of RM224m from this project, implying a four sen per share increment to the overall equity value of Langsat Terminals," said the research firm in a note.
HLIB reiterated its "buy" call on the stock and raised its target price to RM3.04 from RM3 previously.
