Dialog

 23 Jan 2021

Dear Fellow Investor,

This week I will review Dialog which we hold for most of our clients.

Bloomberg daily chart of Dialog showing insider buying and selling

Green arrows represent insider buying while red arrows represent insider selling. Buyers are far exceeding sellers. EPF has been the major buyer. The only reason insiders buy is they think prices will go up.

In the last quarter reported in November 2020 revenue dropped by half from the corresponding quarter in 2019. Drop was caused by reduced oil demand with the Covid issues. Despite the drop in revenue there was a 5.3 % increase in net operating profits  due to recurring revenues from their tank farm storage facilities.

Bloomberg research summary shows a consensus price target of RM 4.50 from current level of 3.26 which is a 35% return from current level.

Dialog is our only oil and gas holding and I  bought it because it’s an integrated oil company meaning it has operations in upstream, downstream and midstream activities. It also has international exposure including Singapore, Hong Kong, China, Japan and Saudi Arabia. I also like it because they have a number of recurring revenue streams which protects them during oil price slumps.

From a business point of view, it is  highly rated by Dynaquest with a 7 rating meaning the business is solid and well managed.  They have consolidated for the last few months in a narrow range but have survived the economic  and Covid slowdown.

With infection and death rates declining and vaccines soon to be rolled out, Malaysia and Asian economies should recover. Demand for oil should recover and this share should out perform.  If you have noticed lately petrol prices locally have been rising. Internationally oil prices have also been rising.  This is another sign of economic recovery.

Take care and Happy New Year

Bill.

From the Perth Mint, Year of the Ox symbolizing diligence, persistence and honesty