Dialog announced that it has signed a contract with PRPC Utilities and Facilities Sdn Bhd (PRPCUF) for the provision of Engineering, Procurement, Construction and Commissioning (EPCC) of Titanium Nitrile Butadiene Latex (NBL) Outside Battery Limit Facility Project for Pengerang Integrated Complex (PIC) at Pengerang, Johor. The project is worth RM248m. While neutral to this project given its negligible contribution to the Group’s earnings, this contract nonetheless should keep the Group’s EPCC segment busy for the next 20 months and also to help increase the utilisation of its yard. We kept our forecast unchanged as we have assumed contract replenishment in our earnings projection. This contract is expected to contribute c. 0.9% and 1.3% to the Group’s FY22 and FY23 bottom line respectively. Our Outperform call on Dialog is maintained with an unchanged TP of RM3.86. We still like Dialog for its strong track record, defensive business model and steady recurring income generation from its tank terminal business.

• Contract details. The Group will construct the required interconnecting & utilities line and a new Effluent Treatment Plant (ETP) Facility in the PIC. The identified interconnecting & utilities lines and the new ETP Facility are to support the development of the NBL Plant by providing all the required utilities, offsite and interconnecting feedstock pipelines for the NBL plant to operate and treat its effluent at the new ETP Facility. The contract which is worth RM248m will commence immediately with execution period of about 20 months. Hence, it is expected to be completed by 2Q 2023.
  
  The contract is awarded by PRPCUF, which is a subsidiary company of PETRONAS Refinery and Petrochemical Corporation SB (PRPC). PRPC is the developer of the PIC in Pengerang, Johor.

• Our view. We view this development positively as it should keep the Group’s EPCC segment busy for the next 20 months and also to help increase the utilisation of its yard. While there are no further details provided by management with regards to the Group’s EPCC segment (balance orders in hand, profit margin etc.), our forecast suggests that this contract will contribute RM6m and RM9m to the Group’s FY22 and FY23 bottom line respectively based on 8% assumption on pre-tax profit margin. This translates to about 0.9% and 1.3% contribution to our FY22 and FY23 earnings forecast. No change to our earnings projection nevertheless as we have assumed contract replenishment in our forecast.

Source: PublicInvest Research - 5 Nov 2021