Dialog Group (DLG MK, RM0.805) - CIMB

This morning, Petronas was reported to have shut down indefinitely its polyethylene and PVC processing plants in Kertih due to low demand. We understand that the operations of the centralised tankage facility, whose concession is held by Dialog’s associate Kertih Terminal Sdn Bhd (KTSB), are not negatively affected due to a guarantee of 88% usage of its capacity by five customers. Therefore, Dialog is expected to continue enjoying its portion of KTSB’s concession earnings. KTSB is now in the 9th year of its 20-year concession. We maintain our forecasts but raise our target price from RM1.19 to RM1.30 due to a recent adjustment in our target market P/E from 11x to 12x. Dialog remains a BUY, with the share price triggers being 1) a bigger EPCC order book, and 2) new partners in Tanjung Langsat. At midday, the stock closed 5.3% or 4.5sen lower at RM0.805.