September 12, 2024 [New Straits Times]- Dialog Group Bhd is in discussion with a few potential off-takers for its Pengerang Deepwater Terminals phase 3 (PDT3) in Johor, according to Hong Leong Investment Bank Bhd (HLIB Research).

The research firm is expecting Petronas (biorefinery) and ChemOne (condensate refinery) to sign tank terminal leases with Dialog to support their ongoing refinery development in Pengerang.

“We view that announcements on further tank terminal expansion will be a re-rating factor for the stock,” it said in a research note.

HLIB Research said that Dialog’s upside catalysts are still intact, supported by further expansion in PDT3.

The firm also anticipates Dialog’s downstream engineering, procurement, construction, and commissioning (EPCC), as well as plant maintenance, to start the financial year ended June 30, 2025 (FY25) with a clean slate in the coming quarters.

This is given the completion of loss-making projects by end FY24, coupled with a renewed plant maintenance master service agreement (MSA) with Petronas kicking in from July onwards, it said.

On Dialog’s exit from Jubail Supply Base, HLIB said the decision to dispose of its entire 60 per cent stake in Dialog Jubail Supply Base in Saudi Arabia for RM55 million is timely as the country is slowing its capital expenditure (capex) programs.

“We reckon the exit is timely as we understand that DJSB’s activities are heavily dependent on drilling activities in the Middle East region, suggesting that its contribution has likely peaked,” it said.

HLIB maintained its ‘buy’ call with a target price of RM3.04 on Dialog.

“We like Dialog for its recurring income business model and its unique position in riding the future expansion of Pengerang via development of tank terminals.

“We look forward to the group securing new long-term dedicated storage tank terminal contracts for its PDT3 with approximately 500 acres available for future development,” it added.