[RAM] RAM Ratings affirms DIALOG Group's AA2 and A1 debt ratings
RAM Ratings has affirmed the respective AA2/Stable and A1/Stable ratings of DIALOG Group Berhad’s (DIALOG or the Group) RM3 bil Senior Islamic Medium-Term Notes and RM3 bil Subordinated Perpetual Islamic Notes. The subordinated notes are rated two notches below the senior notes to reflect the former’s increased loss severity and risk of non-performance relative to senior debts.
The rating affirmations are based on DIALOG’s strong business profile which benefits from diverse earnings and a robust balance sheet. The stronger showing of the upstream and midstream segments have supported and steadied the Group’s bottom line in the last three years despite earnings deterioration faced by the downstream segment. DIALOG remains a leader in the domestic tank terminals sector, its midstream segment having grown steadily over the years, bringing the segment’s operational capacity to 5.1 mil cubic metres. As a material portion of its bottom line comes from contracted services, DIALOG gains from long-term earnings visibility, which further supports its ratings.
DIALOG’s top line and pre-tax earnings climbed to a respective RM3.15 bil and RM658.31 mil in FY Jun 2024 (FY Jun 2023: RM3.00 bil and RM533.14 mil), backed by the higher O&G output of the upstream segment while the midstream segment enjoyed strong utilisation and throughput. More selective bidding for projects led to lower revenue at the downstream segment, which suffered a wider loss as costs stayed elevated. For 1H FY Jun 2025, the Group’s pre-tax profit plummeted 90.6% to RM30.03 mil (1H FY Jun 2024: RM319.83 mil), largely due to substantial cost provision in the downstream segment and RM134.73 mil of impairments on investments in petrochemical and renewable projects. Nonetheless, the provision and impairments do not impact cashflow and the Group’s financial profile remain commensurate with the ratings.
The Group’s bottom line is expected to be markedly lower this year and rebound in the following two years, supported by ongoing upstream production enhancements and improving downstream margins from a rising proportion of higher-margin contracts. Meanwhile, midstream earnings are relatively stable, anchoring the Group’s pre-tax profit.
DIALOG’s balance sheet and debt servicing ability are strong. Total debts reduced to RM1.98 bil as at end-June 2024 and RM1.83 bil as at end-December 2024 from RM2.43 bil as at end-June 2023. This translates into low gearing and net gearing ratios of a respective 0.31 times and 0.08 times as at end-December 2024 (end-June 2023: 0.41 times and 0.12 times). Meanwhile, the strong performances of the upstream and midstream segments increased funds from operations (FFO, including dividends received) debt coverage to 0.59 times in fiscal 2024 (fiscal 2023: 0.24 times).
Besides scouting for new investments across business segments, the Group has commenced development of the Baram Junior Cluster Small Field Asset Production Sharing Contract. Total capital expenditure and investments over the next three years could exceed RM3 bil, potentially pushing total borrowings over RM3 bil by end-June 2027. DIALOG’s balance sheet is envisaged to remain robust, with gearing and net gearing not exceeding 0.45 times and 0.30 times, respectively. Over the same period, FFO (including dividends received) debt coverage is expected to stay above 0.30 times.
Its ratings remain moderated by its expansion plans on multiple fronts which may heighten execution risks and expose DIALOG to unfamiliar hazards. Foreign exchange movement and raw material price volatility are other downside factors.
Analytical contacts
Ben Inn
(603) 3385 2510
ben@ram.com.my
Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my