Billion Ringgit Club 2011: Dialog Group Bhd

One of The Edge BRC’s top 10 companies of the year for 2011, Dialog Group Bhd is currently making headlines for its involvement in the Pengerang project in Johor, a major oil and gas initiative under the Economic Transformation Programme.

Established in 1984, Dialog is an integrated specialist technical service provider to both upstream and downstream sectors of the oil and gas industry. Its services include logistics (for tank terminals and supply base); specialist products and services; plant maintenance and catalyst handling; engineering and construction; fabrication and ePayment technology and solutions.

Based in Kuala Lumpur, Dialog has offices and facilities in 12 countries — Malaysia, Singapore, Thailand, Indonesia, Vietnam, China, Hong Kong, Saudi Arabia, Australia, New Zealand, UK and the US. It has established partnerships with leading technology partners, including Shell, Johnson Matthey, ConocoPhillips and Enventure, for the provision of specialist products and services.

TEFD speaks to its executive chairman and co-founder, Ngau Boon Keat. Ngau, aged 63, graduated in Mechanical Engineering from the University of Canterbury, New Zealand. With over 38 years experience in the oil and gas sector, he began his career in 1972 as a Refinery Engineer with Mobil Singapore Pte Ltd and worked in Petronas from 1975 to 1980 before branching out to start Dialog.

TEFD: What are the company’s competitive strengths and advantages?
Ngau Boon Keat: Dialog’s competitive strength lies in its dynamic ability to constantly transform and evolve itself. This transformation has enabled us to diversify and achieve a sustainable business model through our involvement in tank terminals, plant maintenance and specialist services. Through this, we have a recurring income base, which enables the group to sail through major economic downturns.

The world continues to evolve and improve on technology. Similarly, we emphasise upgrading our technology, as well as improving and enhancing work processes and systems.
Ngau hopes to increase the company's profit base by five to eight times in the next 10 years.

Another key strength is our strong reputation and commitment to deliver quality and timely completed jobs with high standards. Dialog’s competitive advantages stem from having a core group of highly motivated and loyal professionals and our ability to manage project and financial risks via the expertise that we have acquired from many years of experience.

What have been the major achievements of the company in the past four years (since 2007)?
Over the last four years, Dialog has seen significant growth, with nearly 140% growth in revenue from RM476.6 million in 2007 to RM1,139.1 million in 2010. Our profit after tax rose 142% from RM51.6 million in 2007 to RM124.7 million in 2010, with an average return on equity of 21%. All these were achieved despite going through a financial crisis in 2008/09.

This is the second quantum leap achieved by Dialog. The first was from 1997 to 2000, when we embarked on our first investment into the tank terminals business.

Dialog has paid RM312 million in total dividends since its listing in 1996, and has a dividend payout policy of at least 40% of net profit attributable to shareholders.

In the last four years, we have seen Dialog realise several major achievements, one of which is the terminal investment in Tanjung Langsat, Johor where phase one and two are now in operation, while phase three and Terminal two are under construction. All in, they will have total storage capacity of 650,000 cubic metres. In 2011, Dialog together with our joint venture partner, Vopak Terminal Pengerang BV, which is part of the Royal Vopak group, embarked on Phase one development of the RM5 billion independent deepwater petroleum terminal in Pengerang, Johor.

The Pengerang terminal is one of the entry-point projects (EPPs) under the National Key Economic Areas (NKEA), which is part of the government’s Economic Transformation Programme to transform Malaysia into a high-income nation by 2020.

Phase one of the terminal will have an initial storage capacity of 1.3 million cu m with an initial investment of about RM1.9 billion. This investment will propel Dialog into its next quantum leap.

As part of the Pengerang terminal development, Dialog has secured the provision of engineering, procurement, construction and commissioning (EPCC) works for Phase one, with an estimated value of RM1.9 billion. This was based on our track record in EPCC projects for terminal facilities in Kertih, Terengganu and Tanjung Langsat, Johor.

Overseas, Dialog has ventured into Saudi Arabia where we are currently developing a centralised integrated offshore supply base to service the Jubail region with an investment of approximately RM100 million. The Jubail Supply Base shall serve as a one-stop, integrated offshore logistics hub and resource centre for oilfield services, equipment and supplies, supporting the active and growing offshore oil and gas development in the Arabian Gulf.

Having constantly been seeking opportunities to further strengthen and enhance our fabrication business, we acquired a 90% equity stake in Fitzroy Engineering Group Ltd (FEGL). FEGL is New Zealand’s largest heavy fabrication and multi-discipline engineering companies covering both the upstream and downstream oil and gas sector.

With the acquisition, Dialog will leverage FEGL’s strengths in high quality engineering capabilities, business processes and methodologies, intellectual property rights for welding procedures as well as its workforce of 400 employees, which is the right mix of expertise and skills complementing our current skill sets.

With FEGL’s established track record in New Zealand and Australia for high quality engineering and reliability, FEGL’s integration into Dialog’s fabrication business will provide the Dialog group with immediate access to the established New Zealand market, as well as provide growth opportunities for its Australian and regional market.

What are the major challenges your company faced over the years and how did it overcome them? Is there anything else you would have done differently?
Over the years, Dialog has constantly evolved itself from being an engineering and construction-based company to an integrated specialist technical service provider and equity owner of tank terminals. This strategy has generated sustainable growth and income for the group.

The process was a result of our strategy in taking steps to avoid the pitfalls of over reliance on cyclical income streams as well as the challenge of weathering financial crises. Thus far, the model has suited us well, and we will continue on this path to transform ourselves to better face challenges in the future.

How is the company positioning itself within your industry? What are your strategies to grow or gain market share?
Dialog has positioned itself as a serious player in the oil and gas industry through its continuous evolution into an integrated specialist technical service provider and equity owner of tank terminals. Dialog will continue to strive and maintain a good reputation through honouring its commitments and delivering the highest quality work in a timely manner. And we will continue to grow along this way.

What are the company’s plans for the future, short-term and long-term? What are your plans to compete in the increasingly globalised environment?
As part of its long-term growth strategy, Dialog will continue to expand its logistics business — tank terminals and supply base, as well as plant maintenance and specialist services. In addition, we will continue expanding our scope in our venture into the provision of upstream expertise services for the domestic market.

Dialog will carry on strengthening its human capital growth and focus on attracting talents to continuously strengthen the group. We also plan to further expand our geographical presence in existing market while penetrating new ones.

As we expand our presence globally, we are also mindful of giving back to the less privileged members of society. This is achieved through our Corporate Social Responsibility initiative, the MyKasih Programme, in helping the less fortunate and needy families.

In addition, using technology innovation, Dialog has developed and provided the ePayment technology to help facilitate the programme. To date, it has benefited about 8,000 families in 75 locations throughout the country. We have plans to reach 10,000 families by August 2011.

What is your dream for your company? How would you like to see it in 10 years time?
Based on our current plans and growth rate, my dream is for Dialog to be five to eight times its current profit base in the next 10 years.