DNeX riding high on semiconductor shortage, on track to chalk RM150m net profit

KUALA LUMPUR Feb 7 - Dagang NeXchange Bhd (DNeX) is on a roll and is on track to make a RM150 million net profit in financial year ending June 2022.

Industry observers said the company is expected to announce the respectable net profit amid the pandemic and tough economic conditions.

"DNeX share price has been on the rise for the past week ahead of its second quarter financial results ended December 2021 which will be announced within this month.

"Traders have already accumulated DNeX shares for the past week in anticipation of the higher than usual net profit," trader NorHamidy Yusuff told DagangNews.

DNeX is expected to announce its second quarter financial results ended December 2021 within this month.

DNeX) had bought a 60 percent stake in loss making semiconductor firm SilTerra Malaysia Sdn Bhd  from Khazanah Nasional in July last year.

The remaining 40 percent is owned by China's Beijing Integrated Circuit Advanced Manufacturing High End Equipment Equity Investment Fund CGP.

They both bought SilTerra for RM273 million cash.

Hong Leong Investment Bank Bhd analysts Jeremy Yap and Tan J Young had said DNeX is expected to register a RM150 million net profit in 2022.

This would rise further to RM202.3 million and RM223.0 million net profits in 2023 and 2024 respectively.

"DNeX has been showing impressive earnings growth from Silterra acquisition due to the robust demand for semiconductors.

"Due to the pandemic, demand for IT products such as laptops, smartphones and tablets have shot through the roof.

This would spur demand for semiconductors which translates into higher revenue earnings for DNeX.

HLIB Research said DNeX oil unit Ping Petroleum Ltd  will also benefit from current high oil prices at over US$100 per barrel.

Post-acquisition, HLIB had highlighted that SilTerra turned into the black, registering profits of RM21.2 million in merely two months from August to September 2021.

SilTerra had secured two huge contracts, said Yap and Tan, who initiated coverage on DNeX with a "highly convicted buy" call and target price RM1.35.

"DNeX share prices is already hovering at the RM1 level and it will be a matter of time before it scratches RM1.30," said Nor Hamidy.

"Due to current macroeconomic condition where the world is going through a major semiconductor shortage, SilTerra is taking the opportunity to leverage on the tight supply situation by increasing its products of mainly wafers" said HLIB.

This would help bolster DNeX's performance in upcoming quarters.

www.cnbc.com reported that semiconductor companies around the world are preparing to make major investments in their research and development facilities, in an effort to meet growing demand as the global chip shortage rages on.

The world’s largest contract chipmaker, TSMC, has committed to investing $100 billion over three years to ramp up production of its cutting-edge silicon wafers, which are used to make a variety of chips while Intel of the US will committ US$20 billion in Arizona. - DagangNews.com