🔥 In the past few years, DNEX fell into a loss due to a lack of proper management. This scenario is caused by some of the company’s machinery are not functioning well due to a lack of new parts when there are no capital inflows.
🔥 On 1 October 2020, DNEX’s board of directors have installed a new senior management team led by Group Managing Director Tan Sri Dato’s Sri Haji Syed Zainal Abidin Syed Mohamed Tahir. Tan Sri Syed Zainal brings large corporate and public company experience with his proven track record of success in various industries with deep experiences in operations. Despite his relatively recent arrival, he has already successfully completed two major corporate exercises in 2021 known as the SilTerra joint-acquisition and 60% stake acquisition in Ping Petroleum.
DNEX has successfully turned its losses into profit in the latest quarterly results.
🔥 Let us look into this company together.
Background
Dagang NeXchange Berhad is a Malaysia-based investment holding company that was incorporated in October 1970. DNEX is a leading provider of award-winning eServices for Trade Facilitation and has a wealth of knowledge, expertise and operational know-how in the provisioning of eServices for Trade Facilitation, and System Integration and Consultancy.
DNEX is also making its mark as a reputable player in the oil and gas, and energy sector. The company is listed on the Main Market of Bursa Malaysia in 1983.
Business Model
The company operates through three segments such as Information Technology (IT), Energy and Technology.
IT segment is involved in the provision of e-services for trade facilitation, technology consulting and systems integration, as well as subsea telecommunications services. The company’s energy segment is involved in upstream oil and gas exploration and production as well as equipment supply and maintenance services. While the technology segment is involved in semiconductor wafer foundry which offers electronic customs-related services to ease facilitation and streamlining of trading processes for the import and export, trade and logistics industries.
Important Points
1. Acquisition of SilTerra
DNEX will transform to become one of the major semiconductor players in Malaysia due to the Joint Venture (JV) of SilTerra with Beijing Integrated Circuit Advanced Manufacturing and High-End Equipment Investment Fund Center (CGP). The company is expected to benefit from the extended global semiconductor industry upcycle.
According to the management, SilTerra is engaged with three top-tier data center providers to supply its silicon photonics chips. It is also engaged with a US-based start-up to evaluate its silicon photonics transposer for potential Artificial Intelligence and machine learning applications.
2. SilTerra secured 2 LTAs as of Nov 2021
As of Nov 2021, SilTerra had secured two LTAs worth over US$560m (RM2.3b) with Beijing-based ChipOne Technology (ChipOne) and Taiwanese lli Technology Corp (llitek) that will take up approximately 60% – 65% of its wafer capacity. In this case, it can ensure healthy volume loadings over the next five years.
SilTerra is also looking to invest RM645mil to expand its annual capacity by approximately 20% in 2023. The new CAPEX will raise SilTerra’s annual mask layer production capacity from 8.3m at the end of July 2021 to 10m mask layers. The company expects new capacity to come in by 1Q2023.
3. DNEX benefited from More-than-Moore (MtM) wafers
More-than-Moore (MtM) is a wafer that ranges from 90nm to 350nm nodes to produce chips that go into electronics products which include analog, display drivers, power management (PMICs) and Radio Frequency (RF) devices.
SEMI, the global industry association representing the electronics manufacturing and design supply chain, expects global demand for MtM devices to grow from 45m 200mm wafers in 2017 to 66m 200mm wafers in 2023, which implies a 10% of CAGR over the period.
4. Completion of an additional 60% stake purchase of Ping Petroleum
DNEX completed a 60% stake purchase in Ping Petroleum for US$78m (RM314m) on 29 June 2021 via cash and new shares issuance. Following the acquisition, Ping is now a 90% owned subsidiary of DNEX with the remaining 10% stake held by Ping’s founders. Ping is principally involved in the exploration, development and production of crude oil and natural gas and investment holdings.
Ping is principally involved in the exploration, development and production of crude oil and natural gas companies focusing on shallow water offshore production and development in Southeast Asia and the North Sea. Ping and Hibiscus Petroleum each own 50% of the Anasuria Cluster, which is located in the North Sea. The rationale behind the additional 60% stake purchase was to allow DNEX to control and consolidate Ping’s financial results in the group.
5. Completed the acquisition of its remaining 50% stake in Avalon Oilfield
DNEX has completed the acquisition of its remaining 50% stake in Avalon Oilfield from Summit Exploration and Production Limited in Sep 2021 for a cash consideration of US$5m (RM21.1m) with further contingent payments of an additional US$12m (RM50.6m) based on completion of key milestones.
The additional 50% stake acquisition in Avalon would allow the group to have better control and avoid any potential conflicting decisions that could arise from a new partner. The expansion in Avalon will help in portfolio risk mitigation as Ping would derive its revenue from two independent installations known as the Anasuria cluster and Avalon oilfield.
DNEX is in the midst of submitting the field development plan for Avalon. Following approvals from Oil & Gas Authority which is expected by 2Q22F, Ping plans to commence drilling of development wells on Avalon in 3Q22F. It expects to complete the installations and hook-up of the production facility by 2Q23F.
Fundamental Analysis
🍁𝗠𝗮𝗿𝗸𝗲𝘁 𝗖𝗮𝗽: RM4.007bil
🍁𝗡𝘂𝗺𝗯𝗲𝗿 𝗼𝗳 𝗦𝗵𝗮𝗿𝗲𝘀: 3.155bil
🍁𝗘𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝗽𝗲𝗿 𝗦𝗵𝗮𝗿𝗲: RM0.0673
🍁NTA: RM0.49
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