HLIB Research said it is maintaining its earnings forecasts for the financial years of 2026 to 2028.
PETALING JAYA: Dialog Group Bhd
’s latest win of a RM1bil contract to build biofuel storage and handling facilities in Pengerang, Johor is seen as a positive development, although analysts are keeping their earnings forecasts unchanged.
This is because the engineering, procurement and construction (EPC) contract falls well within analyst expectations.
In a note, Hong Leong Investment Bank (HLIB) Research said its existing assumptions have already incorporated RM2.4bil to RM2.5bil in downstream revenue over the next three-year period.
“We estimate that the project carries a net margin of about 5% to 6%, consistent with typical EPC profitability and supportive of normalised downstream margins going forward.
“We maintain our earnings forecasts for the financial years of 2026 to 2028,” stated the research house.
On Nov 19, Dialog announced that its wholly-owned subsidiary, Dialog E&C Sdn Bhd or DECSB, has secured an EPC contract worth about RM1bil from Pengerang Terminals (Two) Sdn Bhd (PT2SB), its 25%-owned joint-venture, for the development of 272,000 cubic m of biofuel storage and handling facilities in Pengerang.
The project is scheduled for completion by December 2027. The 25-year dedicated tank terminal will be developed for Pengerang Biorefinery (PBSB).
PBSB will be spending RM6bil to develop a biorefinery (650,000 tonnes per year) and the tank will be used to store and support biofuel feedstocks and product storage.
The contract’s scope of works comprises the full EPC of dedicated tanks for bio-based feedstocks and finished products, alongside all associated infrastructure.
With the latest job win, HLIB Research said Dialog’s strategic positioning within the renewable fuels value chain will be reinforced, producing sustainable aviation fuel and other biofuels such as renewable diesel or hydrogenated vegetable oil.
The research house has maintained its forecasts and “buy” call on the Dialog stock, with an unchanged target price of RM2.50.
In a separate note, Maybank Investment Bank Research also maintained its “buy” call on Dialog.
However, it lowered the target price slightly to RM2.21 per share after refining its valuation method.
“Previously, our valuation had incorporated assumptions for potential future tank-terminal wins.
“Given the timing uncertainty of such wins, we have substituted this component with the more tangible value of Dialog’s remaining 660 acres of vacant land, for which we value at RM3mil per acre, namely RM69 per sq ft versus recent listings of RM80 per sq ft in the vicinity.”
