• Overview. Dagang NeXChange Berhad (DNeX) core PBT rose slightly or by 6% YoY to RM67mn in 2Q23 mainly driven by better earnings from Ping Petroleum. This more-than-offset weakerearnings from  Silterra which suffered from lower shipment volumes amidst weak demand. Silterra’s revenue fell sharply by 40% QoQ and 26% YoY to  RM165mn due to this.

• Key highlights. Ping Petroleum delivered stronger performance following the reinstatement of risers which affected production.  Production volume rose 123% QoQ and 33% YoY to 2,690 barrels per day (bpd) which reduced unit production cost to USD17.6/bbl from  USD35.1/bbl in 1Q23.

• Against estimates: Inline. Though 1H23 core PBT of RM148mn only accounted 43% of our FY23F forecast, we deem this as within our estimate as we expect earnings to catch-up in 2H23.

• Balance sheet. The company’s financial position remained sturdy with a net cash balance of RM339mn or RM0.11/share.

• Outlook. Wafer shipments to LTA clients are picking up in January 2023 with utilisation rate rising to 50% from 33% in 2Q23. The recovery is expected to continue in 2HFY23 as LTA clients are fulfilling its committed delivery volumes under the LTA agreement.

• Our call. Maintain our BUY call on DNeX with unchanged TP of  RM0.77. We think it is attractive to accumulate the stock given its long-term growth prospect.

Source: BIMB Securities Research - 21 Feb 2023