Maybank IB Research said the storage facility expansion would have a positive impact on Dialog only from 2027.
PETALING JAYA: Dialog Group Bhd
will likely secure more jobs from the ongoing development at the Pengerang oil and gas hub in Johor.
Maybank Investment Bank (Maybank IB) Research noted that with ChemOne having confirmed that execution works have commenced to build a 6.5-million-tonne per annum facility, Dialog could benefit from potential engineering, procurement, construction and commissioning (EPCC) or sub-contracting works for the facility.
ChemOne is the master developer of PEC.
Dialog could also benefit from the need for tank terminals for storage of products after the completion of the PEC, estimated in 2027.
Maybank IB Research raised its target price for Dialog to RM3.17 from RM3.13 previously and maintained its “buy” call on the counter, which remains its top sector pick.
Dialog on Monday announced that its subsidiary would be expanding its storage facilities for an additional 150,000-cu-m storage for renewable and petroleum products at its terminal in Tanjung Langsat, Johor.
In a filing with Bursa Malaysia, the group said the first 100,000 cu m would be dedicated to EcoCeres Ltd, a subsidiary of EcoCeres Inc, and the remaining 50,000 cu m would be leased to third-party customers such as multinational companies and trading houses.
The expansion is expected to be completed in the first quarter of financial year 2027 (1Q27).
The group’s unit, Dialog Terminals Langsat (3) Sdn Bhd (DTL 3), had secured a take-or-pay storage agreement with EcoCeres Ltd for the dedicated 100,000 cu m of storage, which served as a catalyst for the expansion of its terminal.
Maybank IB Research said the storage facility expansion would have a positive impact on Dialog only from 2027.
Factoring this development in, its target price for the counter was revised higher, it said.
The research house estimated the expansion would deliver an internal rate of return of around 13%, based on the assumption that tank-terminal rates would average at S$7.5 per cuc m per month.
There would also be an annual incremental 3% inflation-adjusted growth on the tank-terminal rates; capital expenditure outlay of RM250mil for the expansion; debt-to-equity funding ratio of 65:35; earnings before interest, tax, depreciation and amortisation margin of 80%; a tax rate of 24%; and a lease till 2048.
Meanwhile, EcoCeres’ new production facility is expected to be operational in the second half of 2025. It is located less than one kilometre away from DTL 3 with direct connection to DTL 3’s storage tanks via pipelines.
“The biorefinery has an annual capacity of 350,000 tonnes and will produce sustainable aviation fuel and hydrotreated vegetable oils that will be stored in Dialog’s tank terminals.
“Dialog will undertake the engineering, procurement and construction portion for the expansion and our new target price is factoring in a completion by 1Q27,” it said.
