Yesterday, DNeX announced that its 90%-owned Ping Petroleum has entered into two contracts: i) the development and production of Meranti Cluster with PETRONAS and Duta Marine Sdn Bhd; and ii) the development and production of A Cluster with PETRONAS and Petroleum Sarawak Exploration and Production Sdn Bhd. Ping’s net participating interest for both the Meranti Cluster and A Cluster will be at 60% and 70% respectively. Both the Meranti Cluster and A Cluster are estimated to produce its first oil in 2024 and 2027 respectively. We are positive on this development as the group ventures into more options to sustain/increase its crude oil productivity. We maintain our BUY call on DNeX with an unchanged SOP-derived TP of RM0.93/share – pegging Silterra’s target P/E multiple to 15x on CY23f PAT.

NEWSBREAK

Yesterday, DNeX announced that its 90%-owned Ping Petroleum has entered into two contracts with details as follows: 1) the development and production of Meranti Cluster with PETRONAS and Duta Marine Sdn Bhd; and 2) the development and production of A Cluster with PETRONAS and Petroleum Sarawak Exploration and Production Sdn Bhd.

HLIB’s VIEW

Key highlights. We note a few key salient points, as below:

1. The pre-development phases for both small-field asset clusters will take no more than 2 years. Ping’s net participating interest for both the Meranti Cluster and A Cluster will be at 60% and 70% respectively.
2. The estimated resource/CAPEX allocation will be refined over the next few months as the asset evaluation is completed.
3. As it is only at its preliminary phase, we are not able to estimate both clusters’ annual production as of yet. We await more clarity from the group in the future. As of now, we gather that the preliminary works will not be revenue or earnings accretive.
4. Both the Meranti Cluster and A Cluster are estimated to produce first oil in 2024 and 2027 respectively.
5. We are positive on this development as the group ventures into more options to sustain/increase its crude oil productivity as our research and forecast indicate that the group’s current Anasuria asset’s production would peak in 2026/2027. Alongside the greenfield Avalon project which is expected to produce its first oil in mid-2025 (FY26), we think that this will diversify Ping Petroleum’s revenue streams and bring the group to greater heights in the next few years.

Forecast. Unchanged.

Maintain BUY, TP: RM0.93/share. We maintain our BUY call on DNeX with an unchanged SOP-derived TP of RM0.93/share – pegging Silterra’s target P/E multiple to 15x on CY23f PAT, which is at a slight discount to TSMC’s 5-year average forward multiple of 17x.

Source: Hong Leong Investment Bank Research - 18 Jan 2023