Broker: Maybank Investment Bank Berhad
Date of Report: July 30, 2025
Dialog Group: New Tank Terminal Win Breaks Pengerang Dry Spell, Paving the Way for Growth
Overview: Dialog Group Secures New Long-Term Project in Pengerang
Dialog Group Berhad (DLG MK), a leading Malaysian technical services provider to the energy sector, has taken a significant step forward by securing a new, long-term tank terminal contract in Pengerang, Malaysia. This contract, via its 25%-owned JV company PT2SB, is set to end Dialog’s project drought in the region since 2019 and marks a substantial boost to its recurring income portfolio.
Key highlights:
- Stock Price (as of report): MYR 1.69
- 12-Month Target Price: MYR 2.34 (+39% upside)
- Market Capitalization: MYR 9.5B (USD 2.3B)
- Major Shareholders: Employees Provident Fund (16.2%), Kumpulan Wang Persaraan (10.6%), Wide Synergy Sdn. Bhd. (8.0%)
New Project Details: Biorefinery Tank Terminal in Pengerang
Dialog’s JV, PT2SB, has signed a 25-year, fully dedicated, take-or-pay agreement with Pengerang Biorefinery SB (PBSB), a joint venture between PETRONAS, Eni, and Euglena. The contract includes:
- Development and expansion of a 272,000 cbm tank terminal
- Capex: ~USD 330 million over three years
- Expected completion: 1H 2028
- Purpose: Storage of biofuel feedstocks and products for PBSB’s MYR 6 billion biorefinery (650,000 tonnes/year)
Financial impact:
- Expected IRR: 9.3%
- Additional NPV to Dialog’s 25% stake: ~+2 sen per share
- Annual recurring profit contribution: MYR 10–15 million, starting FY29E
Potential Upside: More Projects in the Pipeline
Dialog’s ability to secure this project after a multi-year hiatus signals renewed momentum in Pengerang. Market watchers are optimistic that Dialog could capture further upside, particularly from upcoming developments such as the ChemOne Pengerang Energy Complex (PEC), which could require additional long-term storage solutions.
Financial Performance and Forecasts
Dialog’s performance over recent years has seen some volatility but is now positioned for recovery and growth.
| FYE Jun (MYR m) |
FY23A |
FY24A |
FY25E |
FY26E |
FY27E |
| Revenue |
3,002 |
3,152 |
2,627 |
2,840 |
3,049 |
| EBITDA |
517 |
768 |
492 |
660 |
686 |
| Core Net Profit |
506 |
611 |
414 |
559 |
573 |
| Core EPS (sen) |
9.0 |
10.8 |
7.3 |
9.9 |
10.2 |
| Net DPS (sen) |
3.4 |
3.7 |
3.8 |
2.6 |
3.5 |
| Core P/E (x) |
23.0 |
22.1 |
23.0 |
17.1 |
16.6 |
| P/BV (x) |
2.1 |
2.3 |
1.5 |
1.5 |
1.4 |
| Net Dividend Yield (%) |
1.7 |
1.5 |
2.2 |
1.5 |
2.1 |
| ROAE (%) |
9.6 |
10.0 |
6.8 |
8.7 |
8.5 |
Other key ratios:
- Net gearing: Net cash position through FY25–FY27
- EV/EBITDA: Trending down to 14.0x by FY27E
- Dividend payout ratio: Targeted at 40% of PATAMI
Sum-of-Parts Valuation and Target Price
Dialog’s valuation is based on a sum-of-parts (SOP) approach, incorporating its diversified business segments:
| Asset |
Value/Share (MYR) |
Basis |
| Downstream business (EPCC) |
0.00 |
Loss-making for FY25E |
| Upstream business (Bayan, D35/D21/J4, POEC) |
0.28 |
Equity Value: WACC @ 10.0% |
| Midstream (Tank Terminals, incl. Kertih, Langsat, PITSB, PT2SB, PLNG, BP Singapore, Pengerang Phase 3) |
2.12 |
Equity Value: WACC @ 6.5% |
| FY25E net cash/(debt) |
(0.06) |
Net cash position |
| Total Target Price (MYR/share) |
2.34 |
|
Risk Factors and Considerations
Key risks that could affect the earnings outlook and target price include:
- Unexpected slump in crude oil prices
- Cost overruns for EPCC projects
- Decline in tank terminal utilization rates
ESG Analysis: Dialog’s Sustainability Roadmap and Performance
Dialog demonstrates a proactive approach to ESG, with a proprietary score of 54/100 (above-average), supported by:
- Established ESG Roadmap and Strategy Framework (short-term: 2023–2025, medium-term: 2026–2030)
- Annual climate change risk assessment aligned with TCFD
- Investments in renewable/sustainable initiatives, including a recycled PET pellets facility and carbon capture technology
Environmental metrics (FY23):
- Energy consumption: 47.4m kWh
- CO₂ emissions (Scope 1 & 2): 17,326 tonnes
- Water consumption: 147,308 m³
- Hazardous waste generated: 1,258 MT
- No water contamination incidents
Social and Governance highlights:
- 9-member Board (56% independent, 33% female, 78% above 60 years)
- Chairman and Board remuneration: 1.6% and 2.9% of FY23 pretax profit, respectively
- Whistleblowing and sexual harassment policies in place
- Diversified workforce: 2,744 staff across 8 countries, 85% local hires
- Strong safety record: zero Lost-Time Injury and 0.33 Total Recordable Injury Frequency in FY23
Quantitative ESG Data Snapshot
| Metric |
FY21 |
FY22 |
FY23 |
| Scope 1 Emissions (ktCO₂e) |
4.5 |
6.6 |
9.1 |
| Scope 2 Emissions (ktCO₂e) |
7.4 |
8.4 |
8.3 |
| GHG Intensity (kgCO₂e/MYR’m) |
7.4 |
6.4 |
5.8 |
| Total Waste Generated (MT) |
243 |
1,151 |
1,258 |
| % Women in Workforce |
19.0% |
19.0% |
21.0% |
| % Women in Management |
22.0% |
23.3% |
24.3% |
| Training Hours Per Employee |
14 |
14 |
22 |
Conclusion: Dialog Group’s Prospects Remain Bright
Dialog Group’s latest contract win in Pengerang is a vital catalyst, ending a multi-year lull and enhancing its recurring income base. With robust financials, strategic expansion in the midstream segment, and a disciplined ESG approach, Dialog is well-positioned for future growth. The stock’s attractive upside, strong operating fundamentals, and commitment to sustainability make it a compelling investment for long-term, ESG-conscious investors.
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