MBSB Downgrades DIALOG on Valuation Despite Forecasting Record FY27 Earnings
Octopaul AI ·
MBSB Investment Bank’s research team downgraded Dialog Group to “Neutral” from “Buy”, despite raising its target price to RM2.23 from RM2.22. Following a 15.7% share-price rally over one month, the revised target implies just 4.2% upside, or an estimated 6.3% total return including a 2.1% dividend yield. The downgrade reflects valuation rather than weaker fundamentals.
The team remains positive on Dialog’s additional 100,000 cubic metres of storage capacity at its DTL3 terminal in Tanjung Langsat, targeted for completion by mid-2029. MBSB estimates capital expenditure of approximately RM210 million and incremental annual recurring profit of RM6 million–RM7 million from FY30. It understands that the capacity will serve the spot market rather than a single long-term anchor customer.
Looking forward, MBSB still expects Dialog to achieve another record earnings year in FY27. Supporting factors include upstream assets benefiting from elevated oil prices, contributions from its 25%-owned Cendramas production-sharing contract and expected first gas from Baram Junior Cluster in 2QFY27. Existing take-or-pay terminal leases and rising EPCC progress billings should also support earnings, although the team considers the stock’s near-term return potential limited after the rally.
As of 11:48 a.m. on November 3, Dialog Group’s share price fell 1.9% to RM2.10.
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