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$DIALOG / 7277 (DIALOG GROUP BERHAD)

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*Key takeaways from Dialog (NEUTRAL; TP: MYR1.95)’s results concall:*

♦️ *The EPCC losses recognized in this quarter are mainly led by three external projects* that were awarded during tail-end of COVID-19 pandemic. The total project value is c.MYR800m and these are lump sum turnkey projects. Dialog have recognized all the known expenses in related to supply chain and logistic disruption, project delays and re-fabrication of certain components and do not expect further cost provisions on these projects going forward.

♦️ With that, *Dialog is looking to refocus on internal EPCC projects* and to adopt different contracting strategy (cost-plus instead of lump sum model) for external projects.

♦️ *Normalised JV earnings is still guided to be MYR70-90m/quarter*. Midstream is likely to dominate Dialog’s core earnings at 50-60%, followed by upstream (30-40%) and downstream. Occupancy levels and monthly storage rates for independent terminals are still well sustained, at above 90% and above SGD6/cu m.

♦️ *Further growth is expected within the mid-stream space* including *1. Petronas biofinery plant (FID secured in July-24) with estimated storage capacity of 300k cbm*, *2. Aromatic plant (financing secured with FID in the near term) with estimated 1m cbm capacity* and *3. new phase 3 expansion* (at discussion stage with size unknown). All these three projects could potentially be sealed by 2HCY25. *These projects (project 1 & 2) could contribute at least additional 25% growth* to its mid-stream gross capacity. Dialog would like to offer minority stake to the users as strategic partners.

♦️ The company has also fully impaired its JV investment on rPET plant and malic acid investments and hence, *no further operational losses and impairments are expected going forward*. Dialog is looking to pare down its stake in rPET and scrap off capex spent on malic acid plants.

♦️ New rates for plant turnaround and maintenance contracts have kicked in this year and higher activities are expected in CY25.