Dialog seen ripe for re-rating on potential tank terminal contracts
Hong Leong Investment Bank Bhd (HLIB Research) said near term potentials include storage leases for ChemOne's aromatics plant and Petronas' joint venture biorefinery.
The firm maintained its forecasts and reiterated a 'Buy' call on Dialog, keeping the target price unchanged at RM2.59.
"We believe the eventual award of long-term tank terminal contracts for PDT Phase 3 will help re-rate the stock, which is currently trading at a reasonable valuation of 16 times forecast earnings for financial year 2026, compared to its five-year mean of 23 times.
"We like Dialog for its recurring income business model and its unique position in riding the future expansion of Pengerang via development of tank terminals," it said in a research note.
HLIB Research also highlighted that Dialog's downstream engineering, procurement, construction and commissioning business has swung back to minor profitability in the third quarter of financial year 2025 (3Q25).
It said the group had assured that there would be no further cost provisions in anticipation of the official handover of Melamine plant in Kedah and gas compressor plant in Kluang to Petronas by the second half of 2025.
On the midstream front, HLIB Research said storage rates edged up slightly to S$6.4 (RM20.98) to S$6.6 (RM21.63) per cubic metre in 4Q25, compared to S$6 (RM19.67) to S$6.5 (RM21.31) over the past year.
It noted that this uptick was driven by stronger storage demand from oil traders, spurred by increased crude supply from OPEC+ and softening oil prices amid escalating trade tensions and heightened demand uncertainty.
"The temporary shortfall from upstream in 4Q25 should be mitigated by better midstream contribution," it said.
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