PETALING JAYA: Oil and gas (O&G) services provider Dialog Group Bhd
’s taking up of a 100%-interest in the Mutiara cluster small field asset (SFA) production sharing contract (PSC) is being viewed positively by the market despite there being very little detail on the commercial viability of the oil and gas (O&G) fields.
To recap, the company signed a PSC agreement with Petroliam Nasional Bhd (PETRONAS) last Friday to operate up to 14 years from June 15, 2025, the Mutiara SFA located off the coast of Sabah, comprising a group of discovered marginal O&G fields within Malaysian waters.
Dialog estimated spending US$2mil for pre-development over the next two years to assess the technical and commercial viability of the O&G asset.
Analysts covering the stock maintained their positive recommendations, with CIMB Research noting that while there would be no immediate financial gains from the PSC, it would expand the company’s upstream portfolio to six O&G assets should the Raja and Mutiara cluster SFAs become commercially viable.
Dialog currently has three productive O&G fields, with another that was awarded by PETRONAS in January 2025 and targeted for first production by beginning of January 2027.
CIMB Research has maintained a “buy” call on the stock with a target price of 2.50.
“Dialog is currently trading at a financial year ending June 30, 2026 (FY26), price-to-earnings of 16 times, which represents a 38.5% discount to its five-year mean of 26 times,” it said, adding that the upstream segment contributes 35% of the company’s bottom line.
Maybank Investment Bank Research, which also maintained a “buy” call on the stock with a target price of RM2.34, said the PSC agreement showed that Dialog plans to further grow its upstream portfolio.
“In our view, Dialog would need to win new, sizeable tank terminal contracts to grow its recurring income portfolio (currently circa 55% of core net profit)”.
It believes that the company could gain projects from the Pengerang Integrated Complex, given Singapore’s ChemOne group’s development of the Pengerang energy complex and PETRONAS’ development of a RM6bil biorefinery with Eni SpA and Euglena Co Ltd could require tank terminals.
Kenanga Research has maintained an “outperform” call on the stock with an unchanged target price of RM1.94.
The research house is drawing a parallel with its existing valuation of Dialog’s Bayan asset to estimate the potential value of the Mutiara asset, should it be successfully developed.
It could contribute up to 26 sen per share to valuation.
“Dialog’s earnings are stable, driven by improved occupancy rates and spot rates at its independent tank terminals due to the sustained increase in demand regionally for storage.
“Additionally, the completion of legacy engineering, procurement, construction and commissioning contracts that suffered from cost elevation should pave the way for (the company to) at least break even in the coming quarters.
“For now, we believe that the market’s expectations are sufficiently conservative, and upside potential remains in its medium-term earnings outlook.
“That aside, the incoming upturn in plant maintenance and turnaround activities in downstream Malaysia in financial year 2026 and onwards could be a boon to its plant maintenance core,” it added.
