DNeX sees higher opportunities in IT projects


DAGANG NeXchange Bhd (DNeX) expects to see higher opportunities and more public sector spending, especially on information technology (IT) projects.

This comes as the Covid-19 pandemic continues to drive demand for digitalisation and online services in line with social distancing measures to curb the spread of the deadly virus.

DNeX’s business is mainly derived from its IT division at about 80%, while the rest is contributed by the energy division.

The group believes it can withstand the business impact of Covid- 19 as most of its projects — especially government contracts — are ongoing and will carry it through 2020, DNeX executive deputy chairman Datuk Samsul Husin said.

“The key is how we manage our cashflow and cost optimisation to drive operational efficiency and fully leverage our capability to get new projects and ensure earnings sustainability.

“DNeX’s largest revenue contributor is from the IT division, namely the provision of eServices for the National Single Window (NSW) for trade facilitation, which continues to operate as usual during the Movement Control Order as part of essential services,” he told The Malaysian Reserve.

The NSW for trade facilitation is an electronic-based trade ecosystem that links the trading community with relevant government agencies and various other trade and logistic parties through a single window.

Samsul said this business segment corresponds to the level of activities in the country’s trade imports and exports.

“Our financial performance this year will also be supported by ongoing projects of our other business units, including system integration and consultancy and energy,” he stated.

These ongoing projects in system integration and consultancy are also mostly in the government sector, including the maintenance of the integrated government financial and management accounting system, he added.

For the group’s energy division, the potential cut in capital expenditure by global oil companies may affect the provision of services in the upstream segment.

“However, we are fortunate that our two major contracts, Outdoor Payment Terminal and Automatic Tank Gauging, and Petronas Dagangan Bhd will continue to generate a steady revenue stream,” Samsul said.

DNeX’s net profit fell 15.1% year-on-year (YoY) to RM30.01 million in the financial year ended Dec 31, 2019 (FY19), partly due to an overall decrease in gross profit margin and higher losses in the group’s halal business.

Revenue was 1% lower YoY at RM290.49 million in FY19 and it is attributed to work done on its submarine cable installation and repair project in Indonesia, lower progress billings in its system integrator business and lesser revenue for its road charge and vehicle entry permit contract.

At the moment, Samsul said the group doesn’t have any immediate plans to raise capital for ongoing working capital.

“However, we are always open to strategic business opportunities that will add shareholder value and may consider raising capital when the need arises.”

As at FY19, DNeX had a cash balance of RM54.4 million and a gearing ratio of 0.1 time. The group has “ample room to gear up” to fund expansion plans, should the need arise, Samsul added.

He believes global spending in IT and digital technology will not slow down, but potentially increase, given the current operating landscape which augurs well for technology solution providers such as DNeX.

“With this in mind, we are aggressively pursuing opportunities to help narrow the digitalisation gaps across all sectors.

“In trade facilitation, for example, we hope to capture more opportunities in digitalisation of cross-border trade by leveraging our core expertise in trade facilitation,” he said.

Digitalised logistics and trade facilitation allow businesses to respond swiftly and mitigate limitations arising from increased mobility restrictions and social distancing, by increasing reliance on digitalisation in cross-border trade processes.

Additionally, business-to-government and business-to-business communities across borders can be seamlessly connected.

(The headline, paragraph 1 and 2 have been edited and replaced based on the feedback from the related stakeholders for clarity and correctness.)