Tuesday, Nov 19, 2002
Dialog Group Berhad (DGB)’s reaffirmed corporate credit rating of ‘AA-‘ reflects the Group’s continued strong financial profile; attributed by low gearing, strong cash flow position, consistent profit margin and good financial flexibility. Its well-above average position is supported by continuous growth in both revenue and profitability over the years.
DGB is an investment holding company whose subsidiaries and associates provide engineering, procurement, construction and commissioning (EPCC), marketing of specialty chemicals and equipment, provision of specialist technical services, provision of plant maintenance services, petroleum retailing and provision of centralised tankage facilities (CTF) to the oil, gas and petrochemical industry. DGB’s competitive strengths are drawn from its experienced personnel, capability as an integrated multi-disciplinary technical service provider and established record of safety and timely project completion within budgeted cost and quality parameters. Tapping on the existing in-house expertise, wide networking and referrals from the existing customers, the group is aggressively expanding its marketing & consultancy, plant maintenance and retailing portfolio while still in line with the group’s expertise in the oil, gas and petrochemical industry. Operational risk continues to be minimal, backed by its pool of experienced and skilled personnel coupled with good debtors’ control and prudent credit policy practised by the management.
Increasing diversification into non-construction related activities saw a shift in the revenue contribution making up 37% of the group’s revenue during FY2002 and is expected to increase further. Due to the scarcity of EPCC projects in the region, most contracts secured during the year under review are relatively smaller and shorter term in nature. Fiscal 2002 saw the marketing and technical services division outperforming other sectors by registering a 37.7% rise in revenue, owing to the group’s continuous efforts in marketing niche specialized technical services such as the Tracerco radioisotope diagnostic service and catalyst change jobs.
The continued strong upward trend in oil prices that poses an inflationary pressure on the US economy will aggravate the current slow economic recovery process. Nevertheless, Malaysia is placed as a strategic location for long-term petrochemical investments supported by incentives provided by the Malaysian Industrial Development Agency (MIDA) and RM6.9 billion earmarked for investment in the petrochemical industry under the Eighth Malaysia Plan. The increasing power consumption and investment in gas-fuelled power plants would see more gas infrastructure projects in the immediate term. In DGB’s case, the impact of lower EPCC contracts/construction projects will somewhat be cushioned by diversifying group’s into contractual periodic maintenance services and value-added technical services to petrochemical companies.
The group continues to maintain a respectable operating profit margin of around 12% for the second consecutive year, reflecting the management’s prudent cost management. In the absence of positive contributions from major EPCC projects, the group’s near term revenue growth is expected to be flat but maintaining profitability on the back of strong contributions from CTF and recurring income earned from the long term chemical products supply agreement, petrol kiosk retailing and periodic works for plant maintenance services. EPCCexposure towards cyclical construction sector. Expected borrowings for the two major projects and more land acquisitions for the ProJET expansion will lower DGB’s cash flow coverage ratios. Nevertheless, the ratios will still be relatively strong at double digits. Given the group’s conservative policy on the use of debt as a funding source and continuous retention of earnings, group capitalization should remain solid.
The very low leverage, comfortable amount of unutilized credit lines, growing capital base and the continuing accord the group with good financial flexibility.
DGB is an investment holding company whose subsidiaries and associates provide engineering, procurement, construction and commissioning (EPCC), marketing of specialty chemicals and equipment, provision of specialist technical services, provision of plant maintenance services, petroleum retailing and provision of centralised tankage facilities (CTF) to the oil, gas and petrochemical industry. DGB’s competitive strengths are drawn from its experienced personnel, capability as an integrated multi-disciplinary technical service provider and established record of safety and timely project completion within budgeted cost and quality parameters. Tapping on the existing in-house expertise, wide networking and referrals from the existing customers, the group is aggressively expanding its marketing & consultancy, plant maintenance and retailing portfolio while still in line with the group’s expertise in the oil, gas and petrochemical industry. Operational risk continues to be minimal, backed by its pool of experienced and skilled personnel coupled with good debtors’ control and prudent credit policy practised by the management.
Increasing diversification into non-construction related activities saw a shift in the revenue contribution making up 37% of the group’s revenue during FY2002 and is expected to increase further. Due to the scarcity of EPCC projects in the region, most contracts secured during the year under review are relatively smaller and shorter term in nature. Fiscal 2002 saw the marketing and technical services division outperforming other sectors by registering a 37.7% rise in revenue, owing to the group’s continuous efforts in marketing niche specialized technical services such as the Tracerco radioisotope diagnostic service and catalyst change jobs.
The continued strong upward trend in oil prices that poses an inflationary pressure on the US economy will aggravate the current slow economic recovery process. Nevertheless, Malaysia is placed as a strategic location for long-term petrochemical investments supported by incentives provided by the Malaysian Industrial Development Agency (MIDA) and RM6.9 billion earmarked for investment in the petrochemical industry under the Eighth Malaysia Plan. The increasing power consumption and investment in gas-fuelled power plants would see more gas infrastructure projects in the immediate term. In DGB’s case, the impact of lower EPCC contracts/construction projects will somewhat be cushioned by diversifying group’s into contractual periodic maintenance services and value-added technical services to petrochemical companies.
The group continues to maintain a respectable operating profit margin of around 12% for the second consecutive year, reflecting the management’s prudent cost management. In the absence of positive contributions from major EPCC projects, the group’s near term revenue growth is expected to be flat but maintaining profitability on the back of strong contributions from CTF and recurring income earned from the long term chemical products supply agreement, petrol kiosk retailing and periodic works for plant maintenance services. EPCCexposure towards cyclical construction sector. Expected borrowings for the two major projects and more land acquisitions for the ProJET expansion will lower DGB’s cash flow coverage ratios. Nevertheless, the ratios will still be relatively strong at double digits. Given the group’s conservative policy on the use of debt as a funding source and continuous retention of earnings, group capitalization should remain solid.
The very low leverage, comfortable amount of unutilized credit lines, growing capital base and the continuing accord the group with good financial flexibility.