Dialog profit forecast upgraded on downstream ops
PETALING JAYA: Dialog Group Bhd ’s financial year 2025 (FY25) profit is likely to surpass FY20 levels, Maybank Investment Bank (Maybank IB) Research says.

The research house lifted its FY25 and FY26 net profit forecasts by 20% and 19% respectively, to account for higher downstream segment revenue and profitability margins.

Maybank IB Research highlighted multiple positive indicators that would contribute to a surpassed estimated profit. Dialog’s downstream operations are projected to finally be profitable starting FY25, it said.

“The group saw improvement in joint venture and associate contribution as past two quarters were impacted by recognition of one-off non-cash expenses; we project a heightened quarterly core net profit base of RM180mil to RM200mil in FY25,” Maybank IB Research said.

“Our revised forecasts assume the lower end of the range to be conservative,” the research house added.

It highlighted that consensus earnings estimates are lagging behind its revised FY25 forecast by 15%.

“We believe that the contract renewal for its Master Service Agreement would be key to Dialog’s earnings growth in FY25,” it said.

According to Maybank IB Research, Dialog has secured a renewal for its Master Service Agreement with a duration of five years from Petroliam Nasional Bhd under its plant maintenance segment beginning July 2024 at significantly higher rates – as Dialog is trying to scale its downstream segment’s operations back towards pre-Covid profit margins.

The research house noted that Dialog’s existing contract was signed in July 2019 for five years.

“From our findings, its plant maintenance operations were generating profits of more than RM100mil per annum in FY19 and FY20.

“But it has declined to only marginal breakeven levels in FY23 due to cost hikes over the years,” it added.

According to Maybank IB Research, the group’s engineering, procurement, construction, and commissioning (EPCC) segment is likely to be profitable starting in the first quarter of financial year 2025 (1Q25).

As at its latest quarter (3Q24), Dialog’s EPCC segment continued to be loss-making, in comparison to estimated profits of more than RM70mil in FY20.

The segment’s losses have persisted since FY23 due to cost-overruns and this was also due to cost hikes over the years.

“As all of the loss-making legacy EPCC contracts are set to fully lapse in June 2024, we think that this segment will finally be profitable beginning 1Q25 after being in the red in FY23 to FY24, as newer jobs are also signed at improved rates,” the research house said.

Maybank IB Research expects Dialog’s group margins to continue improving in upcoming quarters.

The research house maintained its “buy” rating on the stock with a target price of RM3.13 per share.
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PETALING JAYA: Dialog Group Bhd’s financial year 2025 (FY25) profit is likely to surpass FY20 levels, Maybank Investment Bank (Maybank IB) Research says.