• We remain positive over DNeX’s earnings prospect on the potential rise in the Anasuria field output, possible delay in uCustoms roll out and potential upside from new IT services.

• While we see fundamentals are still intact, we lowered FY17-19F profit forecasts by 10-13%, factoring E&D participation at Ping. We still expect 35% earnings CAGR over FY16-20F.

• In our view, the recent share price retracement has well reflected the potential earnings risks. It is currently trading at 11.2x forward PE which implies PE-G ratio of only 0.32. Thus, we reiterate BUY call despite with a lower SOP-derived TP of RM0.55 (from RM0.60) as we ascribed lower value to Ping due to its exposure in the E&D segment.

Turnaround on track

We remain positive on DNeX’s prospect as management reaffirmed its plan to achieve 20% earnings growth in FY17 and FY18 are on track. For the IT segment, plans are underway to roll out a new B2B platform complementing the NSW while new products to leverage on its RFID expertise are also in the pipeline. For the Energy division, management expects to ride on Anasuria’s increased output while re-strategising on the direction of its subsidiaries, DOS and OGPC.

New products in the pipeline

Management would roll out a new B2B platform dubbed 1Trade, a one stop solution platform providing pre- and post-declaration services. It would be soft-launched during the FIATA World Congress, held in KL over 4-8 Oct 2018. Management also noted several RFID products that it plans to roll out albeit this is subject to the necessary approvals.

Higher Anasuria output and re-strategising subsidiaries

Management noted that the production of Anasuria is expected to rise to 4,200bpd by mid-2018 with planned well workover projects in 2017 and 2018. While it would improve Ping’s earnings, we note that it also ventured into exploration and development (E&D) of wells which raises its earnings risk profile. Meanwhile, management have re-strategised OGPC’s business model to tap the downstream segment while DOS would also be tendering for overseas upstream projects.

Lower earnings forecast on exploration uncertainties

Factoring Ping’s exposure to E&D of wells, we lowered FY17/18/19F earnings by 13%/11%/10% respectively.

Retain BUY with lower TP at RM0.55

Maintain BUY with a lower SOP-derived TP of RM0.55 which implies 13x FY18F PER before easing to 11.9x in FY19F.

Source: BIMB Securities Research - 4 Oct 2017