DNeX prospects brighter on new semicon deals, higher oil price

By SHAFIQQUL ALIFF / Graphic TMR

DAGANG Nexchange Bhd (DNeX) is forecast to see back-to-back quarterly earnings growth at its energy and technology services divisions as the units benefit from strong demand and higher prices. 

Hong Leong Investment Bank Bhd (HLIB) projects that DNeX to enjoy earnings growth over the next 12 months on surging product average selling prices, increasing wafer shipments and higher realised prices for Ping Petroleum Ltd due to soaring crude oil prices. 

The investment bank stated that DNeX’s core earnings to be significantly stronger quarter-on-quarter for the upcoming second quarter of 2022 (2Q22) due to full profit contribution from SilTerra Malaysia Sdn Bhd and higher crude oil prices with its results scheduled to be released on Feb 25. 

HLIB has a ‘Buy’ call on the company with a target price of RM1.35 a share given its strong foothold in both the front-end semiconductor and upstream energy spaces. 

The bank stated it has gathered from checks that DNeX could be running for two more long-term agreements (LTAs) in 1Q22 with the new deals would be somewhat similar to contracts the group has nailed with ChipOne Technology (Beijing) Co Ltd and ILI Technology (Ilitek), where DNeX entered into a multi-year long-term wafer supply agreement with the clients.

“Currently, both the existing LTAs with ChipOne and Ilitek are taking up 65% of SilTerra’s capacity and from recent news flows, we gather DNeX is planning to have c.80% of its capacity tied to LTAs,” it said.