• Keep BUY, TP ticks up to MYR3.11 from MYR3.09 TP, 69% upside with 2% FY25F (Jun) yield. We are positive on the final investment decision (FID) for the field development and abandonment plan under the Baram Junior Cluster (BJC) Small Field Asset Production Sharing Contract (SFA PSC), as it will further boost Dialog's domestic upstream assets. We have been guided that the project IRR is estimated in the low mid-teens. Based on a back-of-envelope calculation, we estimate that its average annual profit is MYR40m (c6% of FY27F earnings), assuming a project IRR of 12%.
• FID for BJC SFA PSC secured. The capex for this field development and abandonment plan is estimated at USD235m. Following the approval, Dialog will embark on a 2-year development phase, of which first gas is expected in end-CY26. Recall that Dialog has a 70% participating interest, including the operatorship of the BJC contract, while Petroleum Sarawak Exploration and Production will hold the remaining 30%.
• Pending further details. We are positive on the FID of this project, as it will further expand Dialog's domestic upstream assets. BJC is one of the six discovered resource opportunities featured in the Malaysia Bid Round 2022. These projects are mostly in shallow waters and located close to existing production infrastructure, which could lower its capex. On its balance sheet, as Dialog has net cash of MYR455m as of 2QFY25, we believe the company should be able to shoulder the equity outlay of USD66m, if the project goes with 60% debt funding. Pending further details such as reserves and production profile, we may not able to accurately assess the potential earnings impact. However, we have been guided that the project IRR is estimated to be in the low mid-teens. Based on our back-of-envelope calculation, the average annual profit is MYR40m (about 6% of FY27F earnings), assuming a project IRR of 12%, 60% debt financing, and Dialog's own 70% stake. At 7% WACC, we value this project at MYR0.03 per share.
• Still BUY. We maintain our earnings estimates, pending further disclosures from the company. Our SOP-based TP rises to MYR3.11 from MYR3.09, with an unchanged 6% ESG discount imputed as per our in-house proprietary methodology - Dialog's ESG score is at 2.7 compared with the country median of 3.0. Downside risks: Weaker tank terminal rates and slower-than-expected expansion of Pengerang Phase 3.

Source: RHB Research - 10 Jan 2025