10 May 2012
All is Well
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.
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.
Fair value: RM3.07
Price: RM2.22
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