Results came in within our expectations (albeit slightly below consensus), as the 3QFY22 quarter saw a marginal QoQ rebound, led by better downstream activities and upstream contribution from higher oil prices, although partially offset by poorer spot terminal rates. Nonetheless, going forward, we believe the group’s long-term prospects remain firmly intact, with further developments of Pengerang Phase 3 to be a key catalyst. Maintain OUTPERFORM with unchanged TP of RM3.30.

9MFY22 within our expectations. DIALOG’s 9MFY22 PATAMI of RM389.8m came in within our expectations at 72% of our full-year estimates, albeit slightly missing street’s expectations at only 69% of consensus forecasts. We believe this could be due to consensus over- optimism on the recovery of its downstream activities. Similarly, announced interim dividend of 1.3 sen per share is also within our expectation but below consensus.

Marginal growth sequentially. QoQ, 3QFY22 PATAMI of RM133.1m marginally grew 4%, in line with the higher revenue, thanks to: (i) improvement in its downstream activities, and (ii) better upstream contribution amidst the higher oil prices. Nonetheless, this was partially offset by poorer JV and associates’ contribution, mainly due to poorer spot terminal rates, especially for its Pengerang Phase 1 terminals. Cumulatively YoY, results were largely flattish. Similarly, revenue grew amidst better downstream and upstream, but this was largely offset by the poorer JV contributions.

Further development of Pengerang a key catalyst. Looking ahead, further developments of Pengerang Phase 3 will be DIALOG’s key focus. Phase 3 is designated for dedicated terminals serving mid-to- long-term clients. With the soon expected start-up of Petronas’ Pengerang Integrated Complex (PIC), we believe this would help DIALOG to expedite talks with potential partners. DIALOG also has another 500 acres of land in the Pengerang area available for further developments for the longer term. Meanwhile, with the current expansion of its Langsat Terminals now completed, DIALOG still has another 17 acres of land in Langsat, which could potentially add another 200k cubic meters of storage capacity in the future – thus bringing Langsat’s total capacity to ~1m cubic meters.

Maintain OUTPERFORM, with unchanged SoP-TP of RM3.30. We made no changes to our FY22-23E numbers post results. Overall, we believe that the group’s long-term outlook remains largely intact, with its mid-stream assets to also provide a degree of earnings defensiveness and resiliency.

Risks to our call include: (i) lower utilisations of its tank terminals, (ii) slowdown in downstream jobs flow, and (iii) delay in the development of Pengerang Phase 3.

Source: Kenanga Research - 18 May 2022