Maintain BUY and MYR4.90 TP
Dialog is off to a good start in 2022. The MYR724m EPCC job win offers a 24-30 months order visibility. That said, its tank terminal operations remain its core earnings contributor and developing Pengerang to its full potential remains its key agenda, a long-term project lasting 10 years. Meanwhile, its green energy agenda is also starting to shape up, targeting the renewable section to contribute 10% to Group’s earnings over the long run. Our SOP-based TP is unchanged.
Salient details of the MYR724m EPCC works
The Dialog-Technip Energies (M) S/B (TEM) consortium (30:70) has accepted a LOA from PETRONAS Chemicals Fertiliser Kedah (PCFK) for an EPCC contract, worth up to MYR724m to: (i) construct a new single-train Melamine plant and (ii) undertake modification of existing plant and utilities. Dialog will undertake the construction and pre-commissioning scope while TEM will handle the EPC scope. The project is expected to be completed by 2H 2024 (about 28-30 months’ work).
A decent contributor …
We are positive on this substantial single EPCC job. Based on an estimated 5%-10% net margin, the consortium should make decent net profit MYR36m-72m. With a 30% stake in the consortium, Dialog’s effective net profit from this job alone is worth about MYR11m-22m; contributing about 1-2% to the Group’s earnings p.a. in FY23-24.
… but Pengerang ops will continue to lead growth
Our estimates are unchanged. We expect stronger earnings and operational outlook from FY23, as it navigates through the pandemic and supply chain disruption issues. We expect greater traction at its Pengerang ops, on new capacity uptake by then as border restrictions end and the Covid-19 pandemic turns endemic.