[RAM] RAM Ratings affirms DIALOG Group's senior and subordinated sukuk ratings at AA2 and A1; outlook stable

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 their higher loss severity and increased risk of non-performance relative to senior obligations.

The affirmation reflects DIALOG’s strong business fundamentals, underscored by its diversified earnings profile across the upstream, midstream and downstream segments of the energy value chain. The Group’s financial resilience is further anchored by a robust balance sheet and healthy liquidity position. DIALOG continues to lead the domestic tank terminal sector, with midstream capacity expanding to 5.1 mil cubic metres. Importantly, a significant portion of earnings stems from contracted services, ensuring long-term revenue visibility.

While FY Jun 2025 performance was impacted by one-off impairments and write-offs that did not affect cash flow, the Group’s financial profile remains consistent with its current ratings. Excluding these non-cash items, pre-tax profit would have been higher at RM484 mil. Looking ahead, the Group’s earnings are expected to rebound strongly from FY Jun 2025 levels, driven by the absence of the above-mentioned one-off charges as well as improved midstream and downstream contributions. In 1Q FY June 2026, revenue and pre-tax profit rose to RM657 mil and RM156 mil, respectively (1Q FY June 2025: RM634 mil and RM151 mil), signaling early recovery. Downstream performance is anticipated to improve gradually following the conclusion of loss-making contracts by end-2025. Additionally, margins are expected to benefit from stronger contributions from integrated technical services, particularly plant maintenance, as well as the recently announced engineering, procurement and construction contract for its 25%-indirect joint venture, Pengerang Terminals (Two) Sdn. Bhd., for the construction of biofuel storage and handling facilities.

As at end-September 2025, DIALOG’s total debt increased to RM2.29 bil, but its gearing and net gearing remained strong at 0.37 times and 0.04 times, respectively. Although capex may exceed RM3 bil over the next three years and will be partially funded through new borrowings, the Group’s strong liquidity and prudent financial management are expected to keep gearing below 0.60 times. Funds from operations coverage is anticipated to remain above 0.30 times, notwithstanding the expected rise in debts.

The reaffirmed ratings are moderated by execution risks associated with simultaneous expansion initiatives and investments with longer gestation periods, which could stretch its financial position if those expansion projects are not properly implemented. Nevertheless, RAM Ratings takes comfort in DIALOG’s proven track record of financial discipline, risk aversion, and strategic partnerships that help mitigate operational and market risks.

Analytical contact
Chew Wei Li
(603) 2708 8301
weili@ram.com.my

Thong Mun Wai
(603) 2708 8255
munwai@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my