4Q18 core earnings declined dwindled to RM1m mainly on missing contribution from associate company and higher effective tax of 65% (4Q17: 30%). Associate contribution fell as Ping deferred one oil cargo to mid Jan 2019. Overall, 2018 core EBITDA of RM64.5m (+23% yoy) was inline with our estimates at 97% but core PATAMI trailed at 67% mainly due to associate contribution falling short.
On qoq basis, core EBITDA grew 88% to RM18m on higher IT segment revenues and narrowing losses in the energy ex-Ping segment. The higher IT revenue (+76% qoq) to RM91m (3Q18: RM52m) was due to: (i) higher revenue from Genaxis and submarine cable installation and repair (DNeX Telco) and (ii) new revenue stream from system integration business. On the energy ex-Ping segment, losses narrowed to RM0.1m (3Q18: RM5.4m) as the company multiplied its effort in delivering PCS to the site.
A final DPS of 0.5sen was proposed. This is similar to 2017 and implies a payout of 25%.
We maintain our HOLD recommendation on DNeX with an unchanged SOP-derived RM0.29 TP. The stock lacks earnings catalyst, in our view, and this is likely to weigh on stock prices.
Source: BIMB Securities Research - 28 Feb 2019
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