Established in 1984 (listed in 1996) Dialog is a leading integrated technical service provider to the upstream, midstream and downstream sectors in the O&G and petrochemical industry. The group serves a diverse range of customers that include multinational oil majors, national oil companies as well as multinational engineering and service providers located throughout the world. The group has grown both organically and through strategic alliances with internationally-renowned technology partners. Its global footprint includes offices and facilities in Malaysia, Singapore, Thailand, Indonesia, Philippines, China, Australia, New Zealand, Saudi Arabia and UAE.

After plunging 31.8% YTD (vs KLCI: -5.4%), we reckon that the risk-reward is getting attractive as the KLCI-linked DIALOG is currently trading at an undemanding 25.2x FY22 P/E (20.3% lower than its 5-years average of 32x). HLIB reiterated a BUY call with a target price of RM 3.45 in anticipation of Its recurring income will improve with the commencement of PDT Phase 3A and Langsat 3l, given that Asia-Pacific oil demand likely to grow over the next two decades. We maintain our view that the company has been steeply oversold with valuation nudging below meanwhile growth in earnings is still on the horizon (+16% EPS CAGR from FY21-23).

Going forward, Petronas’ RAPID facilities are expected to commence within the year, which will improve prospects for its Pengerang Phase 3. To recap, the construction works of the 430,000m³ storage capacity under Phase 3A of Pengerang Deepwater Terminals was completed in March 2021 whilst, the 85,000m³ capacity expansion of Langsat 3 is slated for full completion by the end of CY21. The group is still sitting on 500 acres of Pengerang land ready for future expansions.

After plunging 32% from a high of RM3.50 (4 January) to a low of RM2.31 (22 September), DIALOG is poised for a technical rebound as indicators showing uptick bias. A strong rebound above RM 2.42 will spur the prices towards its August levels of RM2.57-RM2.62. Cut lost at RM 2.20.

Source: Hong Leong Investment Bank Research - 24 Sept 2021