MIDF Research maintains ‘Buy’ call on Dialog


MIDF Amanah Investment Bank Bhd Research (MIDF Research) maintained its ‘Buy’ call on Dialog Group Bhd, as it believes that the group’s robust business structure is able to sustain it through the uncertainties of the pandemic and the oil and gas prices volatility. 

The research house noted that the growing interest for low-carbon operations and products among oil and gas (O&G) players would definitely assist Dialog’s sustainability ventures in the long term. 

“Furthermore, Dialog is also investing in its workforce and leveraging on technology to continue improving its prospects in the financial year 2022 (FY22). 

“We are hopeful that, with the rebalancing of the crude oil and natural gas market, and the growth on O&G operations expected in FY22, as well as the improvement on demand recovery, Dialog’s long-term prospects will remain positive,” it said in a recent research note. 

However, MIDF Research has cut its target price (TP) on Dialog to RM4.15 from the previous TP of RM4.30, as the group rollover into FY23. 

It said the valuation was derived from a sum-of-parts method pegging a revised price-earnings ratio (PER) of 32 times to its core businesses. 

“The revised PER is based on its 5-year historical average. 

“We believe that the PER is reasonable given the improved economic outlook, however, we also believe that the current volatile crude oil and natural gas prices, as well as the impact of the ongoing pandemic, may affect its input and operating cost,” it added.

MIDF Research noted that following the release of its annual report, Dialog has stated that it remains optimistic that activities will pick up in FY22. 

The O&G support services provider also indicated its intentions to further improve its digital transformation initiative to strengthen its competitiveness and adaptability in a post-pandemic economic environment. 

However, regardless of its positive outlook on the economy, the group said the prolonged impact of the pandemic, the uncertainty from the possibility of another Covid-19 outbreaks in the near term, as well as the volatile oil market, remains. 

Moving forward, the group noted that it will continue to adhere to its key long-term strategies, which includes diversifying across its upstream, midstream and down- 

stream businesses; expansion to renewables and recycling; growing long-term recurring income; pursuing active recruitment, development and retention of talent; cultivating strong relationships with stakeholders; and developing and utilising of its patented technology. 

As for the future prospect of its midstream business, the ongoing development of Pengerang Deepwater Terminals (PDT) into the largest petroleum and petrochemical hub for the Asia Pacific region, will also remain its main focus. 

The Phase 3 of PDT has been designated to support further development of various downstream operations. 

Dialog is also investing another RM100 million for an additional 85,000 cu m of storage capacity to store clean petroleum products at Dialog Terminals Langsat (DTL) 

facility; which is expected to commence operations by the end year. 

Approximately, another 200,000-cu m of storage capacity can be added to DTL in the future, bring- ing the total capacity of DTL to over one million cu m. 

Meanwhile, Dialog had also recently entered into a memorandum of understanding with Diyou Fibre (M) Sdn Bhd for a proposed joint venture to build, own and operate a food grade recycled polyethylene terephthalate pellets production facility. 

The venture would be Dialog’s first investment into the downstream petrochemicals and rene ables business. 

This is an additional initiative to the group’s sustainability goals, alongside its ventures in renewable energy as part of achieving net zero carbon emissions by 2050.