DIALOG (7277) : Dialog Group - All gassed up and ready to go
Dialog Group - All gassed up and ready to go
Target RM1.85 (Stock Rating: ADD)
With Phase 1 of the Pengerang tank terminal complex nearing completion, Dialog is stepping on the gas with Phase 2 where it will develop LNG regasification facilities with Petronas Gas and the Johor state government in a project that will cost an estimated RM2.7bn, the company said in an announcement today. We understand that Dialog will also be involved in the construction of selected structures. Pending further details, we maintain our forecasts and continue to value the stock at 21.2x CY16 P/E, a 30% premium over our target market P/E of 16.3x. Pengerang’s attractive outlook is the potential re-rating catalyst that supports our Add call.
What Happened
Dialog has entered into an agreement with Petronas Gas for the development of liquefied natural gas (LNG) regasification facilities comprising a regasification unit and two 200,000m³ LNG storage tanks in Pengerang, Johor. Costing an estimated RM2.7bn, the project will be undertaken by Petronas Gas (65%), Dialog (25%) and the Johor state government (10%). The financing structure is yet to be determined.
What We Think
The announcement confirms that Phases 2 and 3 are ready for development, as we noted in yesterday’s report. The regasification facilities will be developed at Phase 2 just as Phase 1 is nearing completion. We wrote yesterday that Phase 1A has received no less than 50 crude oil shipments since the first shipment on 12 Apr 2014. Phase 1B (petroleum products) is also in operations while the construction of Phase 1C (crude oil) is nearing completion. As Dialog is not specialised in the construction of LNG storage tanks, the task will be undertaken by a foreign company. Dialog, however, will be involved in the construction of structures such as jetties. We understand that Phase 2 is slated to be operational by Oct 2017.
What You Should Do
We advise investors to accumulate the stock as Dialog embarks on another long-term venture that complements its earlier tank terminal investments in Kertih and Tanjung Langsat. Furthermore, Dialog is by far the biggest winner of oil & gas investments under the government's Economic Transformation Programme through its involvement in both downstream (Pengerang tank terminal) and upstream (risk service contracts and enhanced oil recovery).
Source: CIMB Daybreak - 17 November 2014
Dialog Group - All gassed up and ready to go
Target RM1.85 (Stock Rating: ADD)
With Phase 1 of the Pengerang tank terminal complex nearing completion, Dialog is stepping on the gas with Phase 2 where it will develop LNG regasification facilities with Petronas Gas and the Johor state government in a project that will cost an estimated RM2.7bn, the company said in an announcement today. We understand that Dialog will also be involved in the construction of selected structures. Pending further details, we maintain our forecasts and continue to value the stock at 21.2x CY16 P/E, a 30% premium over our target market P/E of 16.3x. Pengerang’s attractive outlook is the potential re-rating catalyst that supports our Add call.
What Happened
Dialog has entered into an agreement with Petronas Gas for the development of liquefied natural gas (LNG) regasification facilities comprising a regasification unit and two 200,000m³ LNG storage tanks in Pengerang, Johor. Costing an estimated RM2.7bn, the project will be undertaken by Petronas Gas (65%), Dialog (25%) and the Johor state government (10%). The financing structure is yet to be determined.
What We Think
The announcement confirms that Phases 2 and 3 are ready for development, as we noted in yesterday’s report. The regasification facilities will be developed at Phase 2 just as Phase 1 is nearing completion. We wrote yesterday that Phase 1A has received no less than 50 crude oil shipments since the first shipment on 12 Apr 2014. Phase 1B (petroleum products) is also in operations while the construction of Phase 1C (crude oil) is nearing completion. As Dialog is not specialised in the construction of LNG storage tanks, the task will be undertaken by a foreign company. Dialog, however, will be involved in the construction of structures such as jetties. We understand that Phase 2 is slated to be operational by Oct 2017.
What You Should Do
We advise investors to accumulate the stock as Dialog embarks on another long-term venture that complements its earlier tank terminal investments in Kertih and Tanjung Langsat. Furthermore, Dialog is by far the biggest winner of oil & gas investments under the government's Economic Transformation Programme through its involvement in both downstream (Pengerang tank terminal) and upstream (risk service contracts and enhanced oil recovery).
Source: CIMB Daybreak - 17 November 2014
