KUALA LUMPUR: Hong Leong Investment Bank (HLIB) research expects Dialog Group Bhd's operating margins to continue to expand in the upcoming quarters, after second quarter financial year 2024 (2QFY2024) core earnings grew 13.2 per cent year-on-year (YoY).
Dialog recorded 2QFY24 core earnings of RM145.8 million, which brought first half core earnings to RM283.6 million, a 8.5 per cent jump YoY.
The results were within the firm (47 per cent) and consensus (49 per cent) estimates.
HLIB research said it expects operating margins to expand now that most of the legacy engineering, procurement, construction, and commissioning (EPCC) are completed by 2QFY24.
"We acknowledge that the storage rates for Dialog's independent terminals have remained steady at SG$6.50 per cubic metre, with a utilisation rate slightly above 90 per cent, compared to SG$5-6 per cubic metre with a utilisation rate of over 80 per cent in calendar year 2022 (CY22)."We believe that the oil storage markets will continue to receive support from ongoing geopolitical tensions and increasing worries regarding energy security," it said.
HLIB Research reported that Dialog observed heightened activity at the Jubail Supply Base in Saudi Arabia, along with increased engineering, construction, fabrication, and plant maintenance operations in significant international markets like Singapore, Australia, and New Zealand during the first half of the financial year 2024 (1HFY24).
Furthermore, the investment bank highlighted that Dialog's improved core earnings in 2QFY2024 were mainly strengthened by reduced losses from certain older downstream projects that had been affected by cost overruns and inflationary pressures.
HLIB research recommended a 'Buy' rating for Dialog, with an unaltered target price of RM2.31.