DNeX to focus on long-term agreement for remaining SilTerra’s capacity

This strategy will provide the group with better system ability costs, better value and improve operating cashflow, group MD says 


DAGANG NeXchange Bhd (DNeX) is planning to have 75% to 80% of subsidiary SilTerra (M) Sdn Bhd’s capacity tied to long-term agreement (LTA) with customers to optimise operational efficiency. 

Its group MD Tan Sri Syed Zainal Abidin Syed Mohamed Tahir (picture) said this strategy would provide the group with better system ability costs, better value and improve operating cashflow. 

He said it is not about the volume or price, instead it is about the value-added the group can get so it must be two-way traffic. 

“As you recall, we’ve already announced the signing with ChipOne Technology (Beijing) Co Ltd for a five-year LTA and we will sign another one within this week which we will make an announcement. LTA with ChipOne has taken about 65% capacity, and there were 15% left which means room for one more agreement. 

“The rest of 20%, we give to small core customers with better margin and also must reserve for new emerging technologies,” he said at the group’s first-quarter ended Sept 30 financial year 2022 (1Q22) results press conference held virtually last Friday. 

DNeX’s net profit for 1Q22 stood at RM293.56 million, while revenue came in at RM270.87 million. 

Revenue in the quarter increased by RM224.97 million compared to the immediate preceding quarter ended June 30, 2021 due to the consolidation of contributions from Ping Petroleum Ltd and SilTerra, which contributed RM67.27 million (24%) and RM148.77 million (54%), respectively. 

There were no comparative figures for the first quarter due to a change in its financial year-end to June 30 from Dec 31. 

Shareholders of DNeX on June 23 approved the acquisition of a 60% equity interest SilTerra from Khazanah Nasional Bhd for RM163.8 million cash. 

DNeX has set a two-year time frame to turn around wafer foundry SilTerra and bring the company back to profitability. 

Syed Zainal Abidin said DNeX and its partner Beijing Integrated Circuit Advanced Manufacturing and High-End Equipment Equity Investment Fund Centre (Limited Partnership) will continue efforts to enhance SilTerra’s competitive edge. 

He said key focus areas will be on removing bottlenecks, improving plant utilisation rate and efficiency, streamlining product portfolio and working towards securing more long-term contracts. 

For its energy subsidiary Ping, Syed Zainal Abidin said the group intends to develop its first greenfield project, Avalon Oil Development, as part of its diversification. 

“Ping has acquired the remaining 50% stake in greenfield asset Avalon to further expand its portfolio of upstream assets in the North Sea, UK. 

“The group is also exploring opportunities to unlock Ping’s untapped potential and maximise economic value from its asset portfolio by rejuvenating existing wells to monetise economically attractive reserves in the Anasuria Cluster,” he added. 

In tandem with the recovery of trade volume and increase in global IT spending, DNeX will be enhancing its trade facilitation-related e-services and digital solutions in the business-to-government (B2G) and business-to-business (B2B) segments to further strengthen their position as the preferred technology partner for all sectors. 

He added that the group’s strong set of financial results in 1Q22 is testament to the success of DNeX’s transformation strategy as it embarked on strategic investments to capitalise on the robust semiconductor industry and recovery cycle of the oil and gas (O&G) industry. 

“It is an encouraging start to the year as SilTerra reports a turn-around to profitability from transformation initiatives implemented to enhance manufacturing processes and optimise efficiencies. In addition, higher crude oil prices have benefitted Ping, a low-cost O&G upstream operator. 

“With the reopening of the economy, rise in global demand for semiconductor chips, as well as increased activity in the O&G and cross border trade sectors, we are confident the strategies implemented to grow and strengthen our core businesses will lead to an even better performance in the coming quarters,” Syed Zainal Abidin said.