UOB Kay Hian
Date of Report: Thursday, 21 August 2025
Dialog Group Berhad: Growth Catalysts Emerge Despite Slower Earnings Recovery

Overview: Dialog Group’s FY25 Performance and Forward Prospects

Dialog Group Berhad (Dialog), a prominent player in Malaysia’s energy sector, provides engineering, procurement, construction and commissioning (EPCC) services, plant maintenance, and owns tank terminals for oil and gas storage. Despite facing headwinds in FY25, its core profit aligned with expectations after adjusting for exceptional items. The company’s medium-term outlook remains robust, with multiple growth catalysts on the horizon and a maintained “BUY” recommendation with a target price of RM2.50, representing a 33.7% upside from current levels.

Stock Snapshot and Shareholder Structure

Share Price: RM1.87
Target Price: RM2.50
Upside Potential: +33.7%
Market Capitalization: RM10,552 million
Major Shareholders:
Ngau Boon Keat: 18.3%
EPF: 16.7%
Azam Utama: 7.6%
Sector: Energy
Listed Shares: 5,642.6 million
52-week High/Low: RM2.52 / RM1.13

FY25 Results: In Line After Adjustments

Dialog’s FY25 core profit matched both in-house and consensus forecasts after removing significant one-off impacts, such as the JV terminal PT2SB commercial resolution and New Zealand land revaluation losses. Earnings recovery is taking longer than anticipated, but the company is poised for new project launches and event catalysts, particularly in storage infrastructure.

Exceptional Items and Dividend Policy

One-Off Gains/Losses in 4QFY25:
RM2.5m asset disposal gain
RM5.7m impairment reversal (sale of food pellet JV inventories)
RM25m one-off gain from JV storage terminal PT2SB
Estimated RM13m loss from Australia/New Zealand (land revaluation)
Dividend:
FY25 DPS: RM0.031 (vs. FY24: RM0.043), maintaining the 40% minimum payout despite weaker profit and higher capex for new projects.

Key Financial Highlights and Outlook

Dialog’s profitability and margins declined year-on-year, but the company demonstrated resilience through its diversified operations and proactive investment in future growth. Below is a summary of key metrics and forecasts:

Strategic Updates: JV Resolutions, Land Revaluation, and Project Developments

PT2SB JV Commercial Resolution:
PT2SB (Dialog holds 25%) recognized a one-off EUR21.7m gain after resolving outstanding claims related to a refinery fire in 2020. Vopak, a partner, confirmed completion of all claims and receipt of the one-off gain, which translated to a RM25m contribution to Dialog’s 4QFY25 JV income.
New Zealand Land Revaluation:
Dialog’s New Zealand properties, purchased for approximately NZ$58m during 2021-22, underwent a routine triennial revaluation. Several properties saw minor value declines, considered non-recurring.
Moritmasu-Dialog JV:
A RM250m facility was launched to market Japanese engineering solutions, targeting RM300m in revenue. However, the JV incurred losses of Rmb12.2m (2023) and Rmb15.4m (2024). Dialog’s share of 1HFY25 losses was RM4m. The JV is now controlled by Moritmasu, with Dialog retaining only protective rights. Losses are expected to persist in FY25 due to delayed startup and tariff uncertainties.

ESG Initiatives: Progress and Commitments

Dialog continues to advance its ESG agenda:
Environmental:
Scope 1 & 2 carbon emissions rose to 17,326 tCO2e in FY23 from 14,865 tCO2e in FY22.
Sustainability goals established.
Zero Lost Time Injury (LTI) frequency in FY23.
Social:
21% female representation in management (up from 19% in FY22).
Over RM440m donated since MyKasih’s inception.
Governance:
Five of nine board members are independent and diverse, though there is family representation in management.

Project Pipeline and Future Catalysts

Johor-Singapore Economic Growth:
Dialog is poised to benefit from the regional economic wave, with several storage projects in the pipeline, including a potential 1m cbm terminal for ChemOne’s aromatics plant.
The biorefinery-related storage is a core component of the projected RM0.45 per share value for Pengerang Phase 3.
GEGHA Project:
Dialog Fitzroy, a subsidiary, is confirmed as an EPC partner for the Good Earth Green Hydrogen and Ammonia (GEGHA) project in New Zealand. This innovative clean energy facility (solar, ammonia, and green hydrogen) will commence construction in 2025. Hiringa Energy, the client, is also a portfolio company for Dialog.

Earnings Revisions and Valuation

Forecast Adjustments:
FY26-27 earnings have been trimmed by 6% and 8%, respectively, factoring in the latest full-year results and conservative assumptions for upstream projects like Baram Junior Cluster, amid subdued oil price outlook.
Valuation:
BUY rating maintained, with a target price of RM2.50 based on FY26 valuations at an implied 30x forward PE.
Multiple earnings drivers are expected, including new storage and upstream ventures, beyond just the biorefinery project.

Comprehensive Financial Position: Balance Sheet and Cash Flow

Conclusion: Dialog Group Remains a High-Conviction Long-Term Play

Despite short-term earnings pressure and a cautious dividend, Dialog Group’s diversified business, robust project pipeline, and strategic positioning in the Johor-Singapore growth corridor underpin its long-term investment appeal. The company’s ongoing ESG progress, prudent capital allocation, and readiness to capitalize on new storage and green energy opportunities reinforce the “BUY” call, underpinned by a RM2.50 target price and a compelling growth narrative for investors.