Worst over for DNeX's SilTerra, says HLIB

KUALA LUMPUR: Despite falling short of Hong Leong Investment Bank Bhd (HLIB) expectations, Dagang Nexchange Bhd's (DNeX) business arm SilTerra Malaysia Sdn Bhd has returned to positive earnings before interest, taxes, depreciation, and amortisation (Ebitda).  

HLIB said the positive shift is attributed to the gradual improvement in wafer shipments and average selling prices (ASP), alongside continued optimisation of operational costs. 

"Hence, we believe the worst could be over for DNeX as we believe ASP will continue to register gradual improvements going forward with ongoing efforts in enhancing product mix," it said in a note. 

Meanwhile, HLIB anticipates a stable contribution from its energy segment, given the current oil price hovering around US$80 per barrel.  

It also looks forward to the reactivation of the Abu Cluster, with an estimated net production of 2.5 thousand barrels per day (bpd) at a 100 per cent interest and achieving first oil in the Abu Cluster by the end of financial year 2024 (FY24).

"We highlight that Ping Petroleum's current net daily production is only about 2,000 bpd," it said. 

DNeX reported a core net profit of RM13.3 million for the quarter ended Sept 30, 2023 (5Q23), reflecting a 17 per cent increase quarter-on-quarter but a 69 per cent decrease year-on-year.  

This brings the cumulative sum for the first 15 months of FY23 to RM111.8 million. 

HLIB considers these results to be below expectations, amounting to 70 per cent of their full-year 18-month FY23 forecasts. 

The firm cut DNeX's financial year 2023, 2024 and 2025 (FY23/24/25) forecasts by 16.7 per cent, 11.7 per cent and 12.8 per cent as it lowered its profit margin and ASP assumptions for SilTerra. 

Post adjustments, HLIB has maintained a "Buy" rating on DNeX with a lower target price of RM0.62.

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