• Maintain BUY (TP: RM0.58). Dagang NeXChange Berhad (DNeX) 15M23 core PBT of RM210mn (-40% YoY) was in line with our expectation at 80%. Core PBT more than doubled QoQ to RM31mn mainly on further sales recovery by Silterra, though in remained in the red for the fourth straight quarters with core LBT of RM11mn. Nonetheless, we remain sanguine on its long-term outlook as it set to ride on strong demand growth in semiconductor leveraging on the potential new fab plant deal with Foxconn. Maintain DNeX as a BUY with unchanged SOP-derived TP of RM0.58.

• Key highlights. 5Q23 headline PATAMI declined 73% QoQ to RM13mn due to absence of gain from reversal of Ping’s deferred tax liabilities of RM52mn in 4Q23. Silterra’s revenue rose 23% QoQ to RM157mn on higher wafer shipments and increased ASP. This led to narrower core loss before tax of RM11.3mn from RM27.7mn in 4Q23. Meanwhile, Ping Petroleum’s revenue rose by c.31% QoQ to USD21.4mn from higher sales volume of 203k bbls (4Q23: 192k bbls) and higher crude oil price of USD97/bbl (4Q23: USD75/bbl). However, PBT declined 12% to USD5.6mn due to higher opex.

• Earnings forecast. No change to our earnings forecast.

• Outlook. Silterra remains on recovery mode with factor loading continue to improve. This is supported by a new customer from automotive industry that was on-boarded since Jul 2023. Revenue from Emerging Technologies was also robust at 17%. Besides working towards finalising its new fab plant deal with Foxconn, the company is also eyeing growth via (i) JV with Ajlan Bros for Neon smart city project in Saudi Arabia, (ii) launching of new ERP products targeting government agencies and SMEs, and (iii) development of Meranti oil field and reactivation of Abu Cluster with first oil targeted in FY24. This is not in our forecast yet pending further clarity from the management.

Source: BIMB Securities Research - 28 Nov 2023