Recently, we met up with Dialog’s management, from which we
gather that the company is making good progress in its
Pengerang deepwater terminal and Balai marginal oilfields projects. Dialog has
reclaimed more than 150 acres of land to construct the terminal, which is more
than sufficient for Phase 1. Meanwhile,
the Balai marginal oilfield’s pre-development stage is slated for completion by
2013, if not this year. Overall, we see
the company’s prime projects being well on track and progressing as
scheduled. Maintain Buy.
Good progress at Pengerang
terminal. To recap, Dialog
has to reclaim about 500 acres of land and has to date
reclaimed more than 150 acres, which is sufficient to build its phase 1
centralized tankage facility (CTF). Phase 1 would have a storage capacity of 1.3m
cubic meters out of a total planned 5.0m cu m for the entire CTF project. We
also understand that with the portion of land reclaimed to date, the capacity
of phase 1 can be extended by another 1.0m cu m if required. Otherwise, the
existing capacity of 1.3m cu m for phase 1 is targeted to be ready by 2014,
with construction slated to be completed by end-2013.
Balai marginal
oilfield also on track. We
understand that Dialog together with its partners, Roc Oil Malaysia and
Petronas Carigali, expects to complete the predevelopment stage by 2013, if not
this year. Dialog’s portion of the risk-sharing contract in the Balai marginal
oilfield is 32%, while Roc Oil and Petronas Carigali hold 48% and 20% respectively. For this contract, which is for a period of
15 years, the 3 parties are expected to
rent a drilling rig together with a work barge from a third party, rather than owing
these assets This will create new job opportunities for the other O&G
services providers.
Company with a
balanced risk appetite. Despite starting off in a relatively prudent and slow pace, we believe the company has made steady
progress throughout the years, largely owing to its
solid management team. In
comparison with its smaller peers, we have
great confidence that Dialog would
be able to deliver on its Pengerang CTF and Balai marginal oilfield
projects, especially since management has conducted extensive studies even
before kicking off preliminary works. Thanks to its good balance of recurring income
and higher risk projects, Dialog
would also have an attractive
risk-return profile going forward.
Maintain Buy. Our
fair value for Dialog remains unchanged at RM3.07, based on a sumof-the-parts
valuation. It has been our favourite defensive O&G stock for
some time in light of its steady
business model, which provides a good cash flow.
Source: OSK188
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