Judging by the earnings and share price performance of Dialog Group Bhd, its shareholders certainly would not have felt the impact of the downturn in the oil and gas industry that threw many companies into deep financial difficulty.
While Dialog’s earnings have grown steadily, its peers have suffered huge losses because of massive asset impairment and a drastic fall in revenue after the collapse in crude oil prices since the fourth quarter of 2014.
Dialog’s presence in the supportive service to downstream segments, for example storage tank terminals, sheltered it largely from the industry slump. The long-term contracts it had secured from major oil companies were generating steady income even when the industry was in the doldrums.
Dialog’s profit after tax (PAT) expanded from RM215.9 million in its financial year ended June 30, 2014 (FY2014), to RM371 million in FY2017, representing an impressive three-year compound annual growth rate (CAGR) of close to 20% — the highest among BRC members. Its annual revenue increased from RM2.55 billion to RM3.39 billion in the same period.
The stellar earnings made Dialog the winner of the highest growth in PAT over three years and joint winner of the 2018 The Edge- BRC award for the highest ROE over three years in the energy sector.
Its return on equity (ROE) was between 12% and 14% — better than that of many of its peers — even as shareholders’ equity nearly doubled from RM1.56 billion at end-FY2014 to RM3.11 billion in FY2017. Adjusted and weighted ROE from FY2014 to FY2017 was 13.8%.
Dialog has exposure to the entire oil and gas value chain, including upstream assets and services, with expertise ranging from integrated technical to development of marginal oilfields.
The group debuted in the tank terminal business in 1997 with a 20-year contract for the Kertih tank terminal in Terengganu. Its big break came from contracts for the Pengerang Deepwater Terminals (PDT) in Pengerang, Johor. The group’s facilities in the southern tip of Johor now support Petronas’ US$27 billion Pengerang Integrated Complex (PIC) project. PDT was one of Dialog’s bigger projects in the FY2014 to FY2017 period.
Dialog owns 46% of PDT’s Phase 1, which was completed in FY2016. It also owns a 25% stake in PDT2 — comprising a deepwater jetty with 11 berths and storage capacity of
1.7 million cu m. The RM6.3 billion facility will be completed early next year.
It is understood that Dialog is securing partners for PDT3, ahead of its scheduled commencement by 2025 with an initial capital expenditure (capex) of RM2.5 billion. The company is set to own 80% of PDT3.
In the three financial years, the company’s other significant projects were jetty topside works for Samsung — also in Pengerang — and a plasticiser plant for UPC Chemicals (M) Sdn Bhd in Kuantan, Pahang.
Dialog continued to see recurring income from its other operations, such as the Langsat Terminal in Pasir Gudang, Johor. It also continued to undertake its traditional businesses, namely downstream asset and plant engineering, construction, and maintenance works.
From its humble beginnings in 1984, Dialog now has offices and facilities in Malaysia, Singapore, Thailand, Indonesia, China, Australia, New Zealand, Saudi Arabia and the UAE.
A few months ago, Dialog made it to the 30-stock FBM KLCI list, thanks to the rise in its market capitalisation from RM11 billion a year ago to around RM18 billion now.
The company plans to make it big in the downstream segment, earmarking half of its 2019 capex of RM1 billion for it.
At its annual general meeting last month, executive chairman Tan Sri Ngau Boon Keat told reporters and analysts that the group might acquire minority stakes in petrochemical plant projects on top of its tank terminal business.
PDT3 would definitely attract such plants to Pengerang, adding to the existing facilities in PIC.
With a strong balance sheet — current ratio of 1.55 times and debt-to-equity ratio of 0.43 times as at June 30, and cash balance of RM1.24 billion — Dialog seems to have all that it takes to ride the expected industry upcycle in the next few years.