Investment Highlights

• We maintain BUY on Dialog Group with an unchanged sum-ofparts-based (SOP) fair value of RM4.80/share, which reflects a neutral ESG rating of 3 stars. This also implies a CY22F PE of 36x – below its 5-year peak of 39x. This is partly based on our valuation of the 650-acre Pengerang buffer land at RM80 psf.

• In a ceremony officiated by Johor Menteri Besar Datuk Hasni Mohammad, Dialog launched Phase 3A of Pengerang Deepwater Terminals (PDT) development yesterday, which had already received its first vessel, oil/chemical tanker MT High Fidelity, on 19 March 2021.

• Operated by Dialog Terminals Pengerang (5) Sdn Bhd, recall that this is the first parcel of PDT's Phase 3 consisting of storage tanks with a capacity of 430,000 cubic metres for clean petroleum products, common tankage facilities which includes shared infrastructure and deepwater marine facilities for Jetty 3.

• Phase 3A, which began after the signing of the long-term storage agreement with BP Singapore in December 2018, covers an initial investment of RM1.6bil or 64% of the indicative preliminary cost of RM2.5bil for the Phase 3 being developed on 300 acres of reclaimed land.

• In our view, Dialog’s strong execution capability is demonstrated by Phase 3A being completed ahead of schedule from an earlier mid-2021 target and also within budget despite the various degrees of the MCO since March last year.

• Besides the storage offtake from BP, Dialog is also targeting medium to long-term oil traders, multinational oil companies, refineries and petrochemical plants for the next phases. These support various downstream operations including those of the refinery and petrochemical plants within the Pengerang Integrated Petroleum Complex.

• Since the first MoU with the Johor state government in June 2009, Dialog and its joint-venture partners have invested over RM13.5bil in Phases 1, 2 and 3 to date. Anchored by the strategically located Johor hub near the congested east-west shipping routes in Singapore, the group is still looking at petrochemical joint venture partners.

• Hence, we expect an ample pipeline of fresh projects and investments given that the group still has 500 acres remaining for developments beyond Phase 3A. Our forecasts are maintained as we have incorporated Phase 3A’s earnings contribution, which largely drives FY22F 16% net profit growth.

• Dialog currently trades at a FY22F PE of 24x – well below its 5- year peak of 39x. We view its higher-than-peer premium as justified given Dialog’s long-term recurring cash flow-generating businesses underpinned by the Pengerang development’s multi-year value re-rating bonanza and low net gearing levels.

Source: AmInvest Research - 6 Apr 2021