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KUALA LUMPUR, June 8 (Bernama) -- Dialog Group Bhd's 100 per cent acquisition of Pan Orient Energy Corp (Pan Orient) will pave the way for the group to climb further up the value chain in the oil production business, MIDF Amanah Investment Bank Bhd said in a note today.
It will be the group's first upstream investment outside Malaysia, the research house said.
On Tuesday, Dialog announced that its wholly-owned Singapore subsidiary, Dialog Systems (Asia) Pte Ltd had entered into a conditional agreement with Alberta, Canada-incorporated Pan Orient to acquire its entire equity interest for US$38.7 million (US$1=RM4.39) cash.
Dialog said the acquisition was in line with the group’s strategy to continue to expand and diversify across the upstream, midstream, downstream and renewable businesses in the energy sector, thus increasing opportunities for synergies within the group.
Pan Orient, via its Singapore subsidiary Pan Orient Petroleum Pte Ltd, holds 50.01 per cent in Pan Orient Energy (Siam) Ltd, the operator of the L53/48 onshore block. The research house said the acquisition is expected to be finalised by the third quarter of this calendar year.
It also said the acquisition will enable the group to expand and diversify its upstream operations in the wake of rising crude prices and provide access to Pan Orient's onshore facilities.
It also said that this is “a rare opportunity” to take over a mature oil reserve outside Malaysia and coupled with Dialog's existing assets, this is “advantageous” for the group despite its one per cent year-on-year decline in earnings for the third quarter of financial year 2022 (Q3FY22).
“Nevertheless, we remain cautious of the risk to the transaction, which would include but not limited to highly volatile oil prices, unfavourable currency exchange, and environmental and political risk,” it said.
MIDF maintains its ‘Buy’ call with a revised target price of RM3.96 per share.
Meanwhile, Public Investment Bank Bhd views the development as “timely” considering the favourable oil price environment, with a significant impact on the group’s production and earnings immediately on completion of the acquisition.
“The group will have equal control of the asset, it will be responsible for the day-to-day operations and management, providing significant levels of financial control and decision-making, the firm said.
The investment bank has an ‘Outperform’ call on Dialog with an unchanged target price of RM3.25 per share.
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