PETALING JAYA: Dialog Group Bhd
is expected to benefit from a new recurring earnings stream from its upstream business following the commencement of commercial gas production at the Salbiah field offshore Sarawak.
Hong Leong Investment Bank (HLIB) Research said it is positive on the development, describing it as a key milestone for Dialog’s upstream segment, with the bulk of Salbiah’s US$164mil (RM667mil) development capital expenditure (capex) already completed. This is expected to significantly moderate future capex requirements to maintenance levels, supporting stronger cash flow generation.
It said the group’s next growth driver would be the Fatimah gas field, the second development under the Baram Junior Cluster (BJC), which involves an estimated capex of US$147mil (RM598mil) and is targeted to achieve first gas by end-2028.
Both Salbiah and Fatimah have estimated gas reserves of about 137 billion cubic ft (bcf) each.
“Given the limited visibility on the gas production profiles of both Salbiah and Fatimah fields, we leave our earnings forecasts unchanged for now, pending further clarity.
“Nevertheless, based on our preliminary estimates, we project an incremental annual net profit contribution of about RM27mil from Salbiah starting financial year 2027 (FY27), potentially rising to about RM61mil upon Fatimah’s commencement in FY29, assuming annual gas production of 13.7 bcf and 17.5 bcf for Salbiah and Fatimah, respectively, and a 20% profit after tax.”
Incorporating these contributions would raise HLIB Research’s FY27 to FY29 earnings forecasts by 12%, 12% and 27.4% respectively, while increasing the research house’s equity valuation by about 2%, equivalent to an additional 10 sen per share.
Dialog announced on Wednesday that its BJC had achieved first commercial gas production from the Salbiah Gas Field on Oct 27, 2026, following the approval of its field development and abandonment plan in January 2025.
Meanwhile, Dialog has reached a final investment decision for the Fatimah Gas Field, the second development under the BJC production sharing contract (PSC), involving an additional investment of US$211mil, following appraisal well results confirming the field’s commercial viability.
Awarded in January 2023 under Malaysia Bid Round 2022, the BJC PSC is operated by Dialog with a 70% participating interest, alongside Petroleum Sarawak Exploration and Production, which holds the remaining 30%.
The PSC has a tenure of up to 14 years, comprising a two-year predevelopment phase for feasibility studies and resource assessment, a two-year development phase, and a subsequent production phase of up to 10 years.
HLIB Research maintained a “buy” call on Dialog with an unchanged target price of RM2.49. RHB Research concurred it is positive on the commencement of production at the Salbiah field and subsequent development of the Fatimah field, as these should strengthen Dialog’s upstream production base and diversify its earnings stream.
“The Salbiah field should provide a full-year production contribution in FY28, while the Fatimah field represents an additional longer-term growth driver, subject to its development schedule and first-gas timeline.”
RHB Research has a “buy” call on Dialog with a target price of RM2.44.
BIMB Research which also maintained its “buy” call on Dialog with an unchanged target price of RM2.40 said the successful execution of Salbiah and the advancement of Fatimah further strengthened confidence in Dialog’s upstream strategy and execution capabilities.
