Dialog Group Bhd
BUY. TARGET PRICE: RM3.17
CAPEX
outlay of RM250 million, estimated IRR of ~13%. The first 100k m3 is dedicated (take-or-pay) to EcoCeres (on the heels of its recent announcement on its RM1 billion investment in a new biofuel production facility in Johor) and the remaining 50k m3 is expected to be leased to other customers such as multinational companies and trading houses. Based on the following assumptions: i) tank-terminal rates of SG$7.5/m3/month; ii) annual incremental 3% inflation-adjusted growth on the tankterminal rates; iii) capex outlay of RM250 million for the expansion; iv) debt-to-equity funding ratio of 65:35; v) EBITDA margin of 80%; vi) tax rate of 24%; vii) a lease till 2048, we estimate an IRR of ~13%.
EcoCeres’s new production facility is expected to be operational in 2H’25 and is located <1km from DTL 3 with direct connection to DTL 3’s storage tanks via pipelines. The biorefinery has an annual capacity of 350k tonnes and it will produce Sustainable Aviation Fuel (SAF) and Hydrotreated Vegetable Oils (HVO) – which will be stored in Dialog’s tank terminals. Dialog will undertake the EPC portion for the expansion and our new TP is factoring in a completion by Q1’27.
ChemOne, the master developer of Pengerang Energy Complex, has confirmed that execution works have commenced (link) to build a 6.5m MTpa facility. The estimated total capex stands at about US$5 billion. We think that Dialog may benefit from both/either: i) EPCC/sub-contracting works for the facility; or ii) the need for tank terminals for storage of products after the completion of PEC (estimated 2027).
Our TP is lifted to RM3.17. Maintain BUY. –
Investment Bank, July 30