Dialog earnings to stay on upward trajectory
PETALING JAYA: Dialog Group Bhd ’s earnings are projected to remain on an upward trajectory, underpinned by easing cost pressures and margin improvement.

Kenanga Research said Dialog’s core profit of RM446mil for the nine months ended March 31, 2024 (9M24) beat expectations, coming in at 85% and 77% of its and consensus full-year estimate, respectively.

“Dialog’s earnings are on an upward trajectory, driven by improved occupancy rates at its Langsat terminals and enhanced performance in the upstream segment, notably in production.

“The group has also benefited from easing cost pressures. Additionally, the completion of legacy engineering, procurement, construction and commissioning (EPCC) contracts suffered from cost elevation should pave the way for better EPCC margins in the coming quarters,” it said in a report.

Kenanga Research maintained an “outperform” call on Dialog with a target price of RM3.18.

Meanwhile, RHB Research expects Dialog’s revenue from the downstream segment to trend higher, going forward, supported by new contracts and new rates to cater for the high cost environment.

This is despite the drop in revenue for the group’s engineering, construction and management segment in the third quarter of financial year 2024.

“Margins are also likely to improve as legacy contracts slowly phase out by the end of financial year 2024.

“Occupancy levels and monthly storage rates for independent terminals are still well sustained, at above 90% and above S$6.50 per cu m,” it said.

RHB Research said production for the Baram Junior Cluster development is expected by end 2026 or early 2027 and the preliminary evaluation appears to be positive.

“For its existing fields, Dialog has ongoing programmes to maintain its production level, which includes drilling activities for its field in Thailand,” it said.

RHB Research maintained a “buy” call on Dialog with a target price of RM2.96.

Meanwhile, MIDF Research said the Middle East continues to lead Dialog’s international operations, with the collective revenue for the international front for 9M24 gaining 9.5% year-on-year (y-o-y) to RM1.07bil, while collective pre-tax profit increased by 6.3% y-o-y to RM135.4mil.

“The higher performance was contributed by activities at Jubail Supply Base, Saudi Arabia. The higher sales of specialist products and services in various international countries have also contributed positively in 9M24,” it said.

MIDF Research said while it believed the tensions in the Middle East, notably in the Red Sea blockade, had a slight upside to Dialog’s storage farm, the group still faced headwinds in terms of inflationary pressures, supply chain disruption and higher material prices as well as labour costs.

“Prolonged geopolitical tensions in Eastern Europe and the Middle East could result in cost overruns and project delays. Nevertheless, we believe Dialog could still mitigate these risks in consideration that its integrated operations allow the divesting to other sub-sectors,” it said.

MIDF Research added that upstream remains a favourable area in the sector and expects the production from oilfields to continue increasing in the coming months, with the relatively stable Brent crude oil price.

“Additionally, Petroliam Nasional Bhd has allocated RM50bil to RM60bil in capital expenditure (capex) for 2024, which includes capex for cleaner energy solutions at 20%.

“We believe Dialog’s upstream and midstream operations will continue to benefit from the higher demand for engineering and specialist services in field projects in the near term, as well as the higher demand for storage capacity to contain cleaner energy products, as part of the group’s environmental, social and governance initiatives,” it said.

MIDF Research maintained a “buy” call on Dialog with a target price of RM2.72.
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Dialog Group Bhd’s earnings are projected to remain on an upward trajectory, underpinned by easing cost pressures and margin improvement.