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发表于 6-5-2009 03:53 PM
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BUY Maintain Target RM1.46
Dialog is keeping to its defensive business strategy of concentrating its resources on downstream activities that either provide recurring income or long-term contracts of 3 to 5 years. It’s business as usual at its Kertih CTF operation while its Tanjung Langsat CTF is expected to start contributing by 2010. Demand for its catalyst handling services has been growing, especially in the US market, despite the low crude oil price while the demand for its specialist products and services remains robust since many O&G projects which have been approved by oil majors are awaiting implementation. Maintain Buy with a target price of RM1.46.
Business as usual for centralised tankage facilities (CTF). Recently, we met with Dialog’s management and gather that: 1) there is no default in the guaranteed 88% output on the part of its 5 users of the Kertih CTF, and 2) the Tanjung Langsat 1 CTF should be completed by July ‘09 with operations expected to start in 2010. Kertih CTF unaffected by Petronas’ plants shutdown. According to management, it’s business as usual at the Kertih CTF despite the recent shutdown of some of Petronas’ Kertih plants, which have affected one of Dialog’s users, Vinyl Chloride. Although activities have slowed down, this user is still using the CTF to store its products. To give more comfort to investors, we understand that: 1) Vinyl Chloride’s contribution to the CTF is only 10% to 20% while the balance is taken up by the other 4 users (with Optimal Group of Companies contributing the largest pie; 2) these are reputable MNCs with strong financial background; 3) the storage cost only makes up a small portion of the 5 users’ total operating costs; and 4) all of them understand that petrochemicals is a cyclical business and would need to ride out the downturn in order to get storage capacity when the cycle turns upwards. Hence, we believe the Kertih CTF’s guaranteed throughput of 88% would be maintained like it was before since it is a take or pay arrangement. Also, there is no change in our initial forecast of a net cash dividend of RM25-RM28m from this CTF going forward.
Dialog’s principal activities are in the provision of centralised tankage facility services, specialist products and services, catalyst handling services, plant maintenance, engineering, and construction and fabrication jobs. |
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