PETALING JAYA: The agreement Dialog Group Bhd
’s joint-venture company Pengerang Terminals (Two) Sdn Bhd (PT2SB) signed with Pengerang Biorefinery Sdn Bhd (PBSB) to provide storage and handling services for the latter raw materials and products is long-term positive.
However, Kenanga Research said the benefit to shareholders is quite small, at about RM0.02 per share because the expected return from this project is lower than that of Dialog’s previous projects under PT2SB.
On Wednesday, Dialog announced that its 25%-owned joint venture, PT2SB, had secured a 25-year take-or-pay terminal usage agreement with PBSB to store sustainable products. The project will involve US$330mil in capital expenditure.
“The win is a positive surprise as no additional capacity expansion beyond those previously announced had been factored in. However, the internal rate of return is expected to be lower at 9.5%, versus 11% to 13% for earlier projects,” said Kenanga Research in a report.
The research firm said the project supports environmental goals, as it will store eco-friendly fuels like sustainable aviation fuel, hydrogenated vegetable oil and bio naphtha.
On outlook, it said Dialog’s earnings were 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, which had suffered from cost elevation, should pave the way for 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 the financial year 2026 (FY26) and onwards could be a boon to its plant maintenance core,” said the research firm.
It has tweaked the stock’s target price slightly to RM1.96 from RM1.94 before.
Meanwhile, UOB Kay Hian (UOBKH) Research said Dialog’s upcoming fourth-quarter 2025 results may disappoint, but investors may look past the weak quarter as the long-term outlook stays positive.
“There is a potential downside risk to our forecast given the lower average oil price quarter-on-quarter. However, we believe any downside from the upstream segment can be offset by storage earnings. Moreover, some of the downstream and plant maintenance contracts are transitioning to new, higher rates,” UOBKH Research said.
Overall, it believes Dialog’s share price in the second half of 2025 will be driven more by news and events since most investors already expect earnings to recover and it’s just a question of when.
“Maintain ‘buy’ and target price of RM2.50 pegged to FY25 valuations. Although market uncertainties still loom, we believe the risks are priced in,” it added.
