Dialog Group Berhad (Dialog) reported a 9MFY26 core profit of RM426 million, coming in within expectations and accounting for 73% of full-year estimates and 76% of consensus forecasts, according to Kenanga Investment Bank Berhad.
The group declared an interim dividend per share of 1.7 sen, broadly in line with expectations, with analysts noting that Dialog typically makes a larger dividend payout in the fourth quarter.
Year-on-year, revenue for the nine-month period rose 12%, supported by stronger Malaysian operations, particularly from higher engineering, procurement, construction and commissioning (EPCC) activity, maintenance services, and specialist products.
Core profit surged 46% year-on-year, driven mainly by lower operating expenses and the absence of losses from completed legacy EPCC projects.
On a quarter-on-quarter basis, revenue declined 8% due to timing differences in EPCC recognition. However, core profit still rose 8%, supported by lower operating expenses and reduced finance costs.
Kenanga said Dialog’s tank terminal business is expected to remain resilient, underpinned by tight storage conditions in Asia, which should continue to support steady demand.
The research house highlighted that future growth will increasingly be driven by Dialog’s upstream segment, with several key projects in the pipeline.
These include the Baram Junior Cluster gas field, expected to commence production in 2027 with a 10-year lifespan; the Cendramas production sharing contract (PSC), which is an existing producing field where Dialog holds a 25% stake and is expected to contribute from the third quarter of CY2026; and the Raja and Mutiara small field assets, which are currently in a pre-development phase and could begin production by 2029 if successful.
Kenanga maintained its FY2026 earnings forecast but raised its FY2027 forecast by 3%, reflecting earlier-than-expected contributions from the Cendramas PSC.
For the Baram project, the research house only assumes earnings contribution from FY2028 onwards, citing potential ramp-up risks in the early production phase.
Following the revisions, Kenanga increased its sum-of-parts-based target price for Dialog by 16% to RM2.63 from RM2.28, incorporating the expected contributions from upcoming PSCs.
The valuation assumes a 10-year production period for all four upstream projects, a weighted average cost of capital of 8.6%, average capital expenditure of USD100 million per project, and an internal rate of return of 25%.
Kenanga said it believes increasing focus on energy security could accelerate approvals and execution timelines for Dialog’s upstream projects.
The research house maintained an “Outperform” call on Dialog, citing its recovery in plant maintenance and specialist product margins, long-term earnings growth from upstream investments, and stable cash flows from its tank storage business.
It also highlighted Dialog’s exposure to low-carbon storage solutions under a take-or-pay rental structure, which is expected to enhance earnings visibility and resilience.
