DNeX slow to gain from higher oil price


DAGANG NeXchange Bhd (DNeX) has been slow to gain from the rise in energy prices, compared to Hibiscus Petroleum Bhd whose share price has rallied despite having an interest in the Anasuria Cluster of oil and gas (O&G) fields in the North Sea.

Analysts are hopeful DNeX will further gain in value this year despite its share price improving by 104%, 18 months after it diversified into the O&G business with a 30% stake buy in Ping Petroleum Ltd, which is an equal shareholder in the Anasuria brownfield asset.

“It has underperformed to Hibiscus because it is more diversified, but its price trend is positive,” said an analyst at a local brokerage.

DNeX, according to Bloomberg, has risen 30% since the first trading day of this year to 55 sen yesterday, giving it a market capitalisat ion of RM956.68 million.

According to AmInvestment Bank Bhd’s research note, DNeX might also trend higher after crossing 50 sen on Jan 3, 2018.

“The technicals show a bullish bias with a target price of 57.5 sen, followed by 60 sen,” the investment bank stated.

DNeX shares now trade at 13 times, trailing a 12-month earnings per share, and 18 times its estimates for the coming year.

The stronger energy prices may also benefit DNeX in terms of its share price, similarly the way it had pushed UMW Oil & Gas Corp Bhd and Hibiscus stocks higher.

Oil prices yesterday rose to a fresh two-and-a-half-year high with Brent crude oil cl imbing above US$68 (RM272) a barrel, an improvement that has been attributed to geopolitical tensions in Iran, as well as the apparent tighter oil market.

CIMB Equities Research on a research note last year said DNeX is expected to stage better performance in 2018 following its National Single Window concession extension and better prospects for its oil unit OGPC Sdn Bhd and associate Ping Petroleum.

To recap, DNeX had embarked on its O&G venture by completing the acquisition of OGPC for RM170 million in the second quarter of 2016.

DNeX acquired the entire equity interest in OGPC and a 52% equity interest in OGPC O&G Sdn Bhd.

During the same year, DNeX invested RM42 million (US$10 million) to acquire a 30% stake in Ping Pet roleum, an upstream O&G service provider with a 50% stake in the producing Anasuria cluster in the North Sea.

Ping Petroleum and its partner, Hibiscus, acquired the Anasuria cluster for US$105 million, or RM447.143 million cash, from units of both Shell and Esso.

When DNeX acquired Ping, the proved and probable reserves of the Anasuria Cluster were estimated at 40.4 million stock tank barrels of oil reserves and 27.9 billion standard cu ft) of gas reserves, based on a valuation report produced by an independent technical and asset valuation unit as at Jan 1, 2015.

As a result, DNeX has 15% equity interest in the Anasuria Cluster.

CIMB expected stronger earnings contribution from OGPC on the back of higher portable container system contract completion, and higher associate’s profit contribution from Ping Petroleum on the back of higher crude oil prices.

Overall, CIMB also projected that DNeX would record a robust 2016-2019 net profit compounded annual growth rate of 18%.