RAM Ratings reaffirms AA2 and A1 ratings of DIALOG Group’s debt issues

Published on 20 Jan 2023.

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RAM Ratings has reaffirmed 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 reaffirmation of the ratings reflects our expectations of an ongoing earnings recovery over the medium term, supported by the Group’s strong business positions in tank terminals (midstream segment) and engineering, procurement, construction and commissioning (EPCC) operations (downstream), as well as the rising prominence of its oil and gas (O&G) production assets (upstream). 

DIALOG’s revenue rebounded significantly to RM2.32 bil in FY Jun 2022 (FY Jun 2021: RM1.61 bil) on the back of a better top line performance by all three segments. Pre-tax profit however slipped to RM529.55 mil (FY Jun 2021: RM583.60 mil), crimped by inflationary pressure and manpower constraints, particularly in the Group’s EPCC jobs. Margin compression is anticipated to moderate in the coming quarters. Earnings of the downstream segment are supported by broader margins from new contracts secured on a higher cost base. Meanwhile, contributions from a newly acquired producing oil field in Thailand will benefit upstream operations. Over the medium term, DIALOG is expected to gain from a pick-up in EPCC and plant maintenance jobs, and the scaling up of its tank terminals business. 

Debts continued to rise to RM2.73 bil as at end-September 2022 in view of ongoing business expansion, although gearing remains strong at 0.49 times (end-June 2021: RM2.21 bil and 0.45 times, respectively). Coupled with high cash balances, net gearing was a robust 0.17 times (end-June 2021: 0.15 times). Despite erosion of earnings and cashflow in fiscal 2022, given elevated costs, the Group’s funds from operations (FFO, including dividends received) debt coverage was lifted to 0.29 times by higher dividends from associates (fiscal 2021: 0.26 times). DIALOG’s debt levels are expected to continue to increase to part-fund business expansions, possibly exceeding RM3 bil by end-June 2025. Even so, DIALOG’s balance sheet will stay sturdy with gearing and net gearing ratios estimated at below 0.55 times and 0.30 times, respectively. Over the same period, FFO debt coverage is anticipated at about 0.30 times. 

The ratings continue to be supported by DIALOG’s leadership position in the local tank terminals sector. With a total storage capacity of about 5.1 mil cubic metres, its midstream segment, particularly the Pengerang Deepwater Terminals, has substantial growth potential. The Group also benefits from long-term earnings visibility as a significant portion of its bottom line is earned from contracted services of its three segments. Dialog enjoys some diversification and synergy across these segments.

As it remains on the lookout for new investments, we are cautious about rapid expansions – especially on multiple fronts and into new businesses – which will elevate execution risk and expose the Group to unfamiliar hazards. DIALOG is also susceptible to foreign exchange movement and the volatility of material prices. 


Analytical contacts
Ben Inn
(603) 3385 2510

Thong Mun Wai
(603) 3385 2522


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

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