PETALING JAYA: Dialog Group Bhd
may be a prime beneficiary of higher oil prices, likely to be proven in a stronger financial performance for the second half of financial year 2026 (2H26), as the group has two upstream assets, according to Maybank Investment Band (IB) Research.
It has lifted its FY26-FY28 earnings per share by 7% to 13% after imputing its higher in-house Brent crude oil price assumptions to US$75, US$70 and US$67 per barrel for 2026-2028.
The research hosue also lifted its sum-of-parts target price by seven sen to RM2.28 a share from RM2.21 a share to reflect higher oil price assumptions.
Apart from its upstream exposure which correlates with higher oil prices, Maybank IB Research liked Dialog for its recurring income portfolio and cash flow stability from its midstream tank terminal assets.
It maintained a “buy” call on the stock.
With improved profitability, it expected the group to be in a net cash position at end-FY26 of RM33.8mil from a net debt of RM26.2mil previously.
It added that during the oil price upcycle in 2022 due to the Russia-Ukraine conflict, Dialog’s upstream contribution improvement may have been masked by engineering, procurement, construction and commissioning (EPCC) losses in its downstream segment.
This was due to cost overruns amid higher raw material, construction costs and country-lock down arrangements due to the Covid-10 pandemic.
At that point, Dialog’s upstream contribution might not have been as significant as now, as the group acquired the stream 50%-joint venture Pan Orient Petroleum Pte Ltd in June 2022.
From its understanding, Dialog has also procured a portion of raw materials prior to the geopolitical tensions.
Dialog would likely be shielded in the near term from higher commodity and building material prices, protecting its EPCC profits.
Based on its checks, Dialog’s independent tank terminals are currently almost fully utilised at more than 90%.
Historically, geopolitical instability often triggers “strategic hoarding” as demand for energy security increases.
Traders typically seek to secure storage to ensure supply continuity. However, if demand for storage continues to outstrip supply, it may pressure higher storage rates for longer tenures for Dialog’s tanks, which could translate into improved earnings and cash flows for the medium term.
Maybank IB Research is not assuming this scenario yet.
Every 10% hike in spot rates would raise group earnings by 4%, based on the research house’s estimates.
