KUALA LUMPUR: Dialog Group Bhd
's upstream earnings are expected to strengthen following the commencement of commercial gas production at its Salbiah field, with further contributions anticipated from the development of the Fatimah gas field.
Hong Leong Investment Bank (HLIB) Research said the start of commercial production at Salbiah marked a key milestone for Dialog's upstream business, providing a new recurring earnings stream.
“We view this positively, providing a new recurring upstream earnings stream, with Salbiah’s capex moderating to maintenance levels,” it said.
Based on its preliminary estimates, the research house projected an incremental annual net profit contribution of RM27mil from Salbiah beginning in the financial year 2027 (FY27), potentially rising to RM61mil following the commencement of production at Fatimah in FY29.
It said the contributions could lift Dialog's earnings by 12% in FY27, 12% in FY28 and 27.4% in FY29.
However, HLIB Research maintained its earnings forecasts for now, citing limited visibility on the production profiles of both fields.
Dialog's Baram Junior Cluster achieved its first commercial gas production from the Salbiah field on Oct 27, while the group has also reached a final investment decision for the Fatimah gas field, involving an additional investment of US$211mil.
The Fatimah field is expected to commence production by the end of 2028.
HLIB Research said capital expenditure at Salbiah was expected to moderate significantly to maintenance levels following the completion of the bulk of its development spending, supporting stronger cash flow generation.
Meanwhile, Kenanga Research said the Fatimah development could add 10 sen per share to Dialog's valuation, based on an assumed gas price of RM25 per million British thermal units and an eight-year production period beginning in 2029.
It said execution risks for the second field should be lower, given Dialog's track record in bringing Salbiah into commercial production.
The Baram Junior Cluster, located offshore Miri, Sarawak, comprises five fields, of which Salbiah and Fatimah have been identified as commercially viable.
Dialog operates the production sharing contract with a 70% participating interest, while Petroleum Sarawak Exploration and Production holds the remaining 30%.
Beyond upstream activities, both research houses remained positive on Dialog's tank terminal business.
Kenanga Research expects the segment to maintain resilient growth in FY27, supported by tight storage capacity in Asia.
HLIB Research said Dialog's stable recurring income from tank terminals, complemented by upstream operations, would continue to underpin its diversified business model.
It also highlighted Pengerang's growing importance as a regional storage and logistics hub, with Dialog's approximately 660 acres of available buffer land potentially supporting further storage capacity expansion.
Kenanga Research raised its sum-of-parts-based target price for Dialog to RM2.75 from RM2.65, maintaining its "outperform" call.
HLIB Research maintained its "buy" recommendation with an unchanged target price of RM2.49.
Both research houses kept their earnings forecasts unchanged.
