MAJOR SHAREHOLDERS

Dialog announces that its 25% owned joint venture, Pengerang Terminal Two SB (PT2SB), has signed a Terminal Usage Agreement (TUA) with Pengerang Biorerinery SB to provide storage and handling services for feedstock and end-products. The agreement entails the expansion of PT2SB’s capacity by 430,000 cbm with total capex estimated at USD133m, under a 20-year take-or-pay arrangement. We are positive on this development, which aligns with our expectations following PETRONAS and its partners, EniLive and Euglena’s final investment decision on 26 Jun 2024. Based on our estimates, the uplift from this storage contract is marginal, contributing just over a sen for our valuation given less than 5% impact to Dialog’s bottom line. However, the EPCC package has yet to be awarded. Given Dialog’s strong execution track record for the existing terminal, we believe it stands a better chance of winning the job. This upcoming EPCC contract is worth keeping an eye on, as obtaining it could act as a key re-rating catalyst for Dialog’s downstream segment. All in, we maintain our estimates as the current completion falls beyond our forecast period (1H 2028). We reiterate our Neutral rating and TP of RM1.70.

• A dedicated storage for Biorefinery feedstock and product. PT2SB, a 25%-owned joint venture of Dialog, is an integrated storage facility located within the Pengerang Integrated Complex (PIC). It currently spans 157 acres with a total tank capacity of 1.3m cbm, developed at an estimated cost of USD1.6bn. Under the TUA with Pengerang Biorefinery, PT2SB will expand its capacity by 272,000 cbm, occupying an additional 30 acres. Post-expansion, about 70 acres of land remains available for future development. The storage facility will support the biorefinery project undertaken by with Pengerang Biorefinery SB, a joint venture between PETRONAS, EniLive and Euglena, which will process 650,000 tonnes per annum of raw materials into sustainable aviation fuel (SAF), hydrotreated vegetable oil (HVO), and bio-naphtha with targeted for completion by 2H 2028.
• Customised build-up to support biofuel. PT2SB’s upcoming 272,000 cbm expansion will cost USD80m, or USD1.2/bbl-pa, comparable to its Phase 1 build (USD1.23/bbl-pa) completed in 2018 but significantly higher than Dialog’s DTL3 Phase 2 (USD370/cbm) and Phase 1 (USD926/cbm). Looking at the bright side, this project is expected to demand a strong double-digit IRR with EBITDA margins of 70-80%. We believe the elevated capex is justified by the customised scope of work supporting a bio-refinery. This facility will include heated, stainless, mix-up, dedicated pipelines, and bio/ice certification. It also includes infrastructure beyond tankage such as berths from loading jetty and associated utilities to store/load raw finished products. These additions drive up cost but are critical for handling bio/ice feedstocks and complying with sustainability standards.

KEY FINANCIAL SUMMARY

Source: Company, PublicInvest Research estimates

Figure 2: Pengerang Deepwater Terminal

An aerial map shows PETRONAS’ Pengerang Integrated Complex (“PIC”). The complex is noted to be a total of 1,200 acres, of which approximately 500 acres are remaining for further development. Various facilities are labeled including PT2SB, PITSB, DFPF, PLNG 2, PT5, and areas for Phase 3 & Future Phases.

Figure 2: PT2SB snapshot

Source: Company

KEY FINANCIAL DATA

INCOME STATEMENT DATA

Growth

Source: Company, PublicInvest Research estimates

BALANCE SHEET DATA

Source: Company, PublicInvest Research estimates

PER SHARE DATA & RATIOS

Source: Company, PublicInvest Research estimates

RATING CLASSIFICATION

STOCKS

OUTPERFORM: The stock return is expected to exceed a relevant benchmark’s total of 10% or higher over the next 12 months.

NEUTRAL: The stock return is expected to be within +/- 10% of a relevant benchmark’s return over the next 12 months.

UNDERPERFORM: The stock return is expected to be below a relevant benchmark’s return by -10% over the next 12 months.

TRADING BUY: The stock return is expected to exceed a relevant benchmark’s return by 5% or higher over the next 3 months but the underlying fundamentals are not strong enough to warrant an Outperform call.

TRADING SELL: The stock return is expected to be below a relevant benchmark’s return by -5% or more over the next 3 months.

NOT RATED: The stock is not within regular research coverage.

SECTOR

OVERWEIGHT: The sector is expected to outperform a relevant benchmark over the next 12 months.

NEUTRAL: The sector is expected to perform in line with a relevant benchmark over the next 12 months.

UNDERWEIGHT: The sector is expected to underperform a relevant benchmark over the next 12 months.