KUALA LUMPUR: Dialog Group Bhd's performance for the financial year 2025 (FY25) is anticipated to remain stable, supported by steady contributions from its upstream and midstream segments, according to analysts.
CIMB Securities Sdn Bhd highlighted that the stability will be bolstered by consistently high utilisation and spot rates for Dialog's independent terminals, driven by robust demand for storage amid persistent geopolitical uncertainties.
The firm also noted that oil production from Dialog's upstream assets is expected to stay consistent, underpinned by ongoing field development efforts, including an active drilling programme.
"Additionally, Dialog will begin operations of the 24,000 cubic metres (cbm) Langsat 3 sustainable aviation fuel storage in the second half (2H) of FY25 at a premium rate, owing to its environmental credentials.
"We anticipate further improvement in its downstream earnings, particularly as the construction of the 150,000 cbm Langsat 3 expansion progresses to an advanced stage," it said in a note.
CIMB said currently, the downstream segment is supported by operations in Malaysia, with the earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin improving to 30.5 per cent, compared with 25 per cent in 1QFY24.
"This aligns with Dialog's guidance on improving downstream profit margins from FY25, particularly in Malaysia, as all loss-making legacy engineering, procurement, construction, and commissioning (EPCC) projects were completed in 4QFY24.
"Additionally, Dialog's master service agreement with Petronas for plant turnaround and daily maintenance is expected to support downstream earnings owing to the revised rates," it noted.
CIMB has maintained a "Buy" call on Dialog with an unchanged target price (TP) of RM3.00.
Public Investment Bank Bhd (PublicInvest) had previously reduced Dialog's FY25-27 earnings forecast by an average of 9.6 per cent to reflect the downside risk of lower independent terminal rates and oil price assumptions for its upstream segment.
This was despite improvements in its downstream segment following the completion of its legacy contracts.
"We believe the group's independent terminal will be negatively impacted when the existing short-term contracts expire, as the current backwardation oil price curve translates excess supply into future contracts, thus reducing benefits of oil storage.
"Its upstream segment would be adversely affected by lower oil prices. As for downstream, Petronas capex prioritisation undertakings may delay some EPCC and maintenance works," it said.
The firm has maintained a "Neutral" call on Dialog with a TP of RM2.12.
RHB Investment Bank Bhd (RHB Research) has maintained its earnings estimates for Dialog, with a "Buy" call and a TP of RM3.09.
The firm said Dialog's downstream segment is expected to improve, with new plant maintenance projects factoring in new rates, potential contributions from the Morimatsu Dialog fabrication plant in Pengerang (expected to be completed by 3QFY25), and gradual margin improvement.
RHB Research also noted that Dialog is actively exploring new markets and engaging potential food and beverage (F&B) customers for its joint venture (JV) food-grade recycled polyethylene terephthalate pellets (PET) plant.