Tuesday, Nov 13, 2001
Dialog Group Berhad’s (DGB) reaffirmed corporate credit rating reflects the group’s strong business position in the plant construction aspect of the oil, gas and petrochemical industries; continued strong financial profile defined by its good earnings performance; strong cash flow position and solid capitalization with minimal debt obligations. These positive features are somewhat moderated by the vulnerability of the group’s revenue base to adverse developments in the oil, gas and petrochemical industries.
DGB’s principal activities comprise broadly turnkey plant construction projects, specialty chemical and equipment services and supplies, plant maintenance and technical services. Engineering, procurement, construction and commissioning (EPCC) of oil, gas and petrochemical related projects remain the group’s core business, accounting for 74.6% on average of the group’s revenue over the past five years. Revenue from the sale of specialty chemical products and plant maintenance made up the balance of the revenue. While revenue has been on an increasing trend over the years, reaching RM320.6 million in FY2001, the proportion of revenue contributed by the EPCC division has been gradually declining. This is in line with the group’s diversification into non-construction related activities (that is, plant maintenance & technical services) in the oil, gas and petrochemical industries; that will introduce an element of stability in the group’s revenue base as well as reduce its capital expenditure needs.
DGB’s competitive advantage is its ability to offer a complete spectrum of highly specialized EPCC services; backed by the availability of highly skilled and experienced personnel; and an established record of safety and timely completion of project within budgeted cost and quality parameters. As at end June 2001, the group’s order book comprised RM265 million worth of outstanding contracts. The largest EPCC contract undertaken by the group is the construction and commissioning of 40 petrochemical storage tanks under the Kertih Centralized Tankage Facility project, at an estimated contract value of RM540 million. The group also has a 30% equity interest in the project; profit contribution from which has helped to prop up the group’s profitability measures.
New contracts secured during the year totalled RM235.9 million, of which RM170 million represent the construction and joint management contract with Kvaerner Petrominco Engineering Sdn Bhd., involving the construction of a butanediol complex in Gebeng, Kuantan.
Acting as the sole distributor in the Asia Pacific region for most of its overseas principals, DGB sells specialty chemical products to petroleum and petrochemical related companies locally as well as regionally. The increase in upstream exploration and production activities by oil companies has resulted in the increase in the sales of specialty chemical products. Together with two other parties, the group also secured a three-year general plant maintenance contract in respect of the Optimal Chemicals’ plant in Kertih, Terengganu. Going forward, revenue contributions from these non-construction related activities will assume an increasing proportion of the revenue base.
DGB’s cash flow protection measures are strong with minimal debt servicing requirement and a relatively stable operating cost structure. Business activities are generally financed by internally generated funds rather than through the utilization of debt. The group’s funding position has also benefited from the adoption of a cash call method in its large EPCC projects, whereby the group receives payment in advance against its projected monthly budget. Group capitalization remains solid; strengthened over the years through the retention of earnings. And with the comfortable amount of unutilized credit lines and strong financials, DGB’s financial flexibility is considered good.
DGB’s principal activities comprise broadly turnkey plant construction projects, specialty chemical and equipment services and supplies, plant maintenance and technical services. Engineering, procurement, construction and commissioning (EPCC) of oil, gas and petrochemical related projects remain the group’s core business, accounting for 74.6% on average of the group’s revenue over the past five years. Revenue from the sale of specialty chemical products and plant maintenance made up the balance of the revenue. While revenue has been on an increasing trend over the years, reaching RM320.6 million in FY2001, the proportion of revenue contributed by the EPCC division has been gradually declining. This is in line with the group’s diversification into non-construction related activities (that is, plant maintenance & technical services) in the oil, gas and petrochemical industries; that will introduce an element of stability in the group’s revenue base as well as reduce its capital expenditure needs.
DGB’s competitive advantage is its ability to offer a complete spectrum of highly specialized EPCC services; backed by the availability of highly skilled and experienced personnel; and an established record of safety and timely completion of project within budgeted cost and quality parameters. As at end June 2001, the group’s order book comprised RM265 million worth of outstanding contracts. The largest EPCC contract undertaken by the group is the construction and commissioning of 40 petrochemical storage tanks under the Kertih Centralized Tankage Facility project, at an estimated contract value of RM540 million. The group also has a 30% equity interest in the project; profit contribution from which has helped to prop up the group’s profitability measures.
New contracts secured during the year totalled RM235.9 million, of which RM170 million represent the construction and joint management contract with Kvaerner Petrominco Engineering Sdn Bhd., involving the construction of a butanediol complex in Gebeng, Kuantan.
Acting as the sole distributor in the Asia Pacific region for most of its overseas principals, DGB sells specialty chemical products to petroleum and petrochemical related companies locally as well as regionally. The increase in upstream exploration and production activities by oil companies has resulted in the increase in the sales of specialty chemical products. Together with two other parties, the group also secured a three-year general plant maintenance contract in respect of the Optimal Chemicals’ plant in Kertih, Terengganu. Going forward, revenue contributions from these non-construction related activities will assume an increasing proportion of the revenue base.
DGB’s cash flow protection measures are strong with minimal debt servicing requirement and a relatively stable operating cost structure. Business activities are generally financed by internally generated funds rather than through the utilization of debt. The group’s funding position has also benefited from the adoption of a cash call method in its large EPCC projects, whereby the group receives payment in advance against its projected monthly budget. Group capitalization remains solid; strengthened over the years through the retention of earnings. And with the comfortable amount of unutilized credit lines and strong financials, DGB’s financial flexibility is considered good.