DIALOG: Solidified Performance Underpins Upgraded Rating
| Key Information | Details |
|---|---|
| Investment Bank | TA SECURITIES |
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Dialog Group has reported its 1HFY26 core net profit of RM274.3 million, which aligns comfortably with both Public Investment Bank’s and consensus full-year estimates at 51.0% and 52.2% respectively. While the second quarter of FY26 saw a marginal sequential decline in core net profit to RM136.8 million, the company achieved a significant turnaround from a core net loss of RM10.9 million in the corresponding quarter of FY25. This strong recovery was primarily attributed to the absence of losses from EPCC projects during their commissioning phases and the discontinuation of a loss-making recycled polyethylene terephthalate (rPET) joint venture. Consequently, Public Investment Bank has upgraded its recommendation on the stock to a Trading Buy from Neutral, maintaining an unchanged target price of RM2.00.
Performance Review
The downstream segment continued its recovery for the third consecutive quarter, bolstered by effective cost optimisation initiatives and the successful completion of several projects. A key highlight was the securing of a new RM1 billion orderbook in November 2025 for the construction of 272,000m³ biofuel storage tanks for its Pengerang Terminals (Two) SB (PT2SB) joint venture, with completion anticipated by December 2027. This development contributed to a robust 16.0% quarter-on-quarter increase in Malaysia segment revenue.
The midstream segment demonstrated resilience, maintaining utilisation rates above 90% and stable lease rates of SGD6.0-6.5 per cubic meter per month. This segment is poised for further expansion, with ongoing projects including a RM1 billion Phase 3 expansion at Pengerang Deepwater Terminals (614,000m³ capacity, targeted for completion by mid-2028) and RM250 million for 150,000m³ renewable fuel storage tanks at Dialog Terminal Langsat 3 (scheduled for completion by 3Q 2026).
Challenges and Strategic Moves
In contrast, the upstream segment experienced weaker earnings during the quarter, mainly due to lower crude oil allocation and softer realised oil prices. Despite these near-term headwinds, Dialog has strategically strengthened its upstream portfolio by securing a participating interest in a new Production Sharing Contract (PSC) alongside Medco Asia Pacific Ltd and EnQuest Petroleum Production Malaysia Ltd. This move complements the ongoing Baram Junior Cluster Small Field Asset (SFA) development and the pre-development studies for RAJA and Mutiara Cluster SFA PSCs, awarded in December 2024 and June 2025 respectively.
Future Outlook
The firm’s solid earnings base, underpinned by strategic orderbook acquisitions and ongoing expansion projects across its downstream and midstream segments, provides a positive outlook. Public Investment Bank believes the recent weakness in the company’s share price is overdone, given the improved fundamentals and strategic positioning for future growth.
Investment Recommendation
With 1HFY26 results meeting expectations and robust operational improvements, particularly in the downstream sector, coupled with strategic upstream interests, Public Investment Bank reiterates its positive stance. The call has been upgraded to Trading Buy with an unchanged target price of RM2.00, reflecting confidence in the company’s sustained performance and potential for recovery.
