Comprehensive Analysis of Dialog Group Bhd: A Detailed Financial Insight
Date of Report: Wednesday, 20 November 2024
Broker: UOB Kay Hian Private Limited
Introduction
This report provides an in-depth analysis of Dialog Group Bhd (DLG MK), focusing on the company’s financial performance, future prospects, and strategic decisions. As a key player in the energy sector, Dialog Group offers engineering, procurement, construction and commissioning (EPCC) services, alongside plant maintenance services. The company also owns and operates tank terminals that store oil and gas while marketing specialty chemicals and equipment.
Company Profile
Dialog Group Bhd is a robust entity within the energy sector. With a significant market cap of RM11,236.0 million (US\$2,613.0 million), it has shown resilience through various market challenges. The company’s major shareholders include Ngau Boon Keat (18.3%), EPF (16.5%), and Azam Utama (7.6%). Despite a slight decrease in target price from RM3.10 to RM3.00, Dialog maintains a “BUY” recommendation, indicating potential growth and investment opportunities.
1QFY25 Financial Performance
Dialog Group’s 1QFY25 results revealed a slight miss in core profit expectations due to lower oil prices and losses from legacy EPCC projects. The exclusion of Dialog Jubail Supply Base (DJSB) from group accounts also impacted results. Despite this, the company’s earnings recovery trajectory remains promising, supported by potential catalysts in storage (Pengerang) and upstream (Balai Junior Cluster). Revenue stood at RM634.5 million, with Malaysia contributing RM381.1 million and overseas operations RM253.4 million.
Key Financials and Projections
| Year | 2024 | 2025F | 2026F | 2027F |
|---|---|---|---|---|
| Net Turnover (RMm) | 3,152 | 2,840 | 2,884 | 2,998 |
| EBITDA (RMm) | 788 | 807 | 859 | 878 |
| Net Profit (Adj.) (RMm) | 595 | 678 | 708 | 754 |
Strategic Insights and Future Outlook
The company’s strategic decisions include the disposal of its 60% stake in DJSB to Sedres for RM55 million, aligning with Saudi Arabia’s revised plans for O&G production. Management guides that DJSB historically contributed about 3% of group profit, which was RM16m-20m in PBT. The removal of DJSB earnings has led to a revision in earnings expectations for FY25-27 by 10%.
Valuation and Recommendation
Despite a slight delay in prospects, Dialog’s earnings recovery is expected to be driven by multiple fronts, not just storage projects. The company is also optimizing its resources to focus on internal EPCC jobs, reducing exposure to high-risk projects. The valuation remains at RM3.00 with a “BUY” recommendation, reflecting limited downside risk and potential catalysts, particularly with Pengerang Phase 3 storage.
Environmental, Social, and Governance (ESG) Updates
- Environmental: Increased CO2 emissions to 17,326 tCO2e in FY23, but sustainability goals are being addressed.
- Social: 21% female representation in management; > RM440 million donations since inception of MyKasih.
- Governance: Five out of nine board members are independent, with diverse backgrounds.
Conclusion
Dialog Group Bhd stands poised for recovery and growth, with strategic alignments and robust financial strategies. Investors are advised to consider the company’s long-term potential, backed by its strong presence in the energy sector and ongoing projects.
