The programme supports Malaysia’s oil and gas, services and, equipment players, which are mostly small and medium enterprises (SMEs). — AFP
PETALING JAYA: Oil and gas (O&G) services provider Dialog Group Bhd
together with other Petroliam Nasional Bhd (PETRONAS) suppliers may benefit from United Overseas Bank (M) Bhd’s (UOB) recently launched Sustainable Vendor Financing Programme (SVFP).
This programme supports Malaysia’s oil and gas, services and, equipment (OGSE) players, which are mostly small and medium enterprises (SMEs).
MIDF Research said in a report that this additional financing option for OGSE players would help them to implement sustainable practices adhering to the National Energy Transition Roadmap.
UOB has made available up to RM1bil under the SVFP to assist OGSE players participating in the PETRONAS suppliers support programme.
The research house said Dialog’s crucial role in the development and operation of Pengerang Deepwater Terminal in supporting the Refinery and Petrochemicals Integrated Development project makes the company an integral part of PETRONAS’ operations and strategic projects and in turn makes adhering to sustainable solutions all the more crucial.
MIDF Research has a “buy” call on Dialog with a target price of RM2.72.
Moreover, the O&G services provider recently renewed its Master service agreement with PETRONAS, after being awarded several engineering, procurement, construction and commissioning (EPCC) contracts.
“We believe financing for clean solutions could assist Dialog in running its EPCC jobs more efficiently at lesser cost, while adhering to its environmental, social and governance (ESG) goals in the long term,” it said.
It also noted that the financing option would assist OGSE companies in transitioning into a more sustainable operation.
“Given the net-zero emission is targeted to be achieved by 2050 in Malaysia, we expect that SVFP could provide the necessary financing to ensure that SME OGSE companies are not left behind in contributing to the nation’s and industry’s ESG compliance.”The downside risks to the SVFP, which would help OGSE companies in obtaining funding and finance solutions for their products and operations, include the initial high cost, impact of market volatility to SMEs and regulatory, as well as policy changes.
“Nevertheless, given the substantial amount offered under the SVFP and the resilience of OGSE companies amid the volatile oil market, we believe these risks could be mitigated,” MIDF Research said.
“Additionally, we opine that investments in green practices can lead to long-term cost savings through increased efficiency and reduced energy consumption, making the SVFP offer feasible to both financiers and the O&G industry players.”For the financial year ended June 30, 2024, Dialog’s net profit rose to RM575.03mil from RM510.52mil in the previous corresponding period, while revenue grew to RM3.15bil from RM3bil a year earlier.
In a note on its latest financial results, Dialog said the economic environment is expected to remain challenging in the short to medium-term. The group said it will continue to build and strengthen its competencies by investing in and multi-skilling its workforce to ensure it remains efficient and competitive.
