January 4, 2012 [Borneo Post] - Oil and gas (O&G) player, Dialog Group Bhd (Dialog) is expected to rake in its second marginal oil field project following the successful procurement of its 15-year Balai Cluster Fields (off Bintulu) projects.
According to OSK Research Sdn Bhd (OSK Research) in a note, the player was most likely poised to garner another project as soon as the middle of next year, after the fabrication works for the Balai Cluster went well underway.
“Given Dialog’s prudent management, we do not see new growth catalysts for the company, other than its potential success in landing another marginal oilfield job as well as making further progress in the deepwater Pengerang Central Tankage Facility (CTF) via Phases 2 and 3.
“We believe that Dialog stands a good chance of securing its second marginal oilfield, possibly as early as mid-2012, after kick-starting the fabrication works for the Balai cluster,” said the report.
Securing reliable long-term customers
The research house believed that the group should not face any hurdles and should be able to secure reliable long-term customers like Vopak or Trafigura. “Once a customer has been identified, construction works will automatically commence since the macro layout, specifications and related supporting industries were already in place when works on Phase 1 commenced.
“Although these catalysts are not expected to generate immediate income for Dialog in 2012, they can potentially do so in the next three to five years as the company’s combination of one-off and recurring income will lift its performance to another level,” the report highlighted.
OSK Research viewed Dialog as the most defensive O&G stock among its local peers based on its resilient business, which had boasted the group a good mix of recurring and one-off income.
Its recurring income had provided the player with a constant stream of cash to meet the company’s operation needs and minor capital outlay for one-off projects which might require upfront cash, particularly on its procurement needs.
As such, OSK Research continued to like Dialog’s defensive business and its net cash of RM92 million which would subsequently ensure the sustainability of its business amidst the volatile nature of the O&G industry.
The research firm pegged the group at RM3.66 per share based on sum-of-parts valuation.
