Dialog Group Bhd has seen a good rebound after a massive sell-down in December last year following its exclusion from the KLCI and MSCI index on 29 Feb 2024. The counter saw over 30% decline from its 52-week high of RM2.47 to a low of RM1.72.

While Dialog has appreciated from its low, the counter is still deemed to be trading at undemanding valuation. In fact, the decline in the share price is seen as a good opportunity for investors to accumulate the shares. This is because Dialog is expected to experience earnings recovery going forward.

Core earnings are anticipated to rise 18.3% in FY24 to around RM600 million fuelled by the diminishing loss impact from certain legacy downstream projects. The company is also expected to register a resilient performance in the oil storage business. Notably, the sequential QoQ margin improvement witnessed in 2QFY24 is expected to persist in the coming quarters as legacy contracts gradually phase out by mid-CY24.

Additionally, the storage rates for its independent terminals have remained steady at SGD6.50 per cbm, with utilization rate exceeding 90%. The ongoing geopolitical tensions and mounting concerns regarding energy security are anticipated to continue bolstering the oil storage markets.

Investors should favour Dialog for its recurring income business model. The company is also in a strong unique position in riding the future expansion of Pengerang via

development of tank terminals. Analysts are anticipating for the Dialog to bag new long term dedicated storage tank terminal contracts for its PDT Phase 3 with about 500 acres available for future development.

They are also betting on better margins ahead from new contracts as well as strong earnings prospects.This is on the back of heightened geopolitical tensions, which support demand for oil storage amid rising concerns over energy security.

What is not to like about Dialog? Again, investors might want to accumulate Dialog before it takes a further leap.