Dialog needs major tank terminal wins to boost earnings, share price, say analysts

New Straits Times

16-05-2025

KUALA LUMPUR: Dialog Group Bhd would need to secure new, large-scale tank terminal contracts in order to drive a re-rating of its share price, as this would strengthen its recurring income base.
According to Maybank Investment Bank Bhd (Maybank IB), recurring income currently accounts for 55 per cent of Dialog's core net profit.
"Dialog could benefit from ChemOne Group's development of Pengerang Energy Complex and Petroliam Nasional Bhd's RM6 billion development of a 650,000 biorefinery with Eni and Euglena with the need for tank terminals for LT storage of refined/crude products," it said in a note.
Dialog reported a decline in net profit for the third quarter of 2025 (3Q25), posting RM134.96 million compared to RM156.16 million in the corresponding quarter last year.
Revenue also dropped to RM578.80 million, with the group attributing its performance during the quarter to contributions from both its Malaysian and international operations, along with profit shares from joint ventures and associates.
Maybank IB said Dialog remains profitable in its downstream segment through both its engineering, procurement, construction and commissioning (EPCC) and plant turnaround divisions.
It added that the group's core net margin rose to a multi-year high of 23.4 per cent in 3Q25, which is an improvement of 0.3 percentage points, likely driven by the absence of losses in the EPCC segment during the quarter.
"The results came in within our expectations. As such, we make no changes to our financial year 2025 to 2027 (FY25-FY27) earnings estimates and maintain our target price of RM2.34.
"We continue to like Dialog for its operational/financial stability from its midstream tank terminal assets," it added.
Hong Leong Investment Bank Bhd (HLIB) noted that Dialog's earnings came in below both its and market expectations, mainly due to higher tax expenses and a slowdown in regional activities as several major projects approached completion in 3Q25.
However, the firm remains optimistic about the outlook for Dialog's downstream segment, expecting continued growth supported by an expanding pipeline of plant maintenance projects and potential reversals of earlier substantial EPCC provisions.
"The group's midstream operations stayed stellar with near full utilisation (>90 per cent) with storage rates of SG$6-6.5 per cubic meter.
"Given the decreasing US dollar/ringgit, its share of joint ventures/associates could potentially see better contributions in the coming quarters due to forex translation gains (Pengerang JV terminals books denominated in US dollars)," it adds.
HLIB has revised down its earnings forecasts for Dialog by 10 per cent for FY25, 7 per cent for FY26, and 6 per cent for FY27, reflecting lower expected revenue from the downstream segment and a higher assumed tax rate.