Analysts still see shine in Dagang Nexchange’s future prospects
KUCHING: Dagang Nexchange Bhd’s (Dagang Nexchange) future prospects has still garnered a rather positive view from the research arm of TA Securities Holdings Bhd (TA Research) after an analysts’ briefing hosted by management.
According to TA Research, although the Thai border Vehicle Entry Permit and Road Charges (VEP-RC) and new brownfield acquisition are unlikely to materialise this year, Dagang Nexchang’s financial year 2017 (FY17) earnings growth will be sustained by higher margins from the trade facilitation business, increased contribution from OGPC and mini-bid wins from the directional drilling umbrella contract.
“We understand that Dagang Nexchange is still in talks with the government regarding the Thai border VEP-RC.
“Hence, no timeline has been confirmed,” the research arm said.
Thus, the research arm believed it is unlikely to materialise in FY17.
TA Research noted that revenue from trade facilitation remained consistent in the first quarter of 2017 (1Q17).
“However, there was significant margin expansion as Dagang Nexchange managed to secure higher margin permits such as motor approved permits and private jetty permits,” it said.
On OGPC, TA Research noted that the subsidiary continues to contribute positively to the group and also saw a slight margin expansion.
The research arm further noted that management’s nearterm goal is to expand into the downstream segment, which would further expand margins and increase the number of contracts available.
As for mini- bid wins, TA Research highlighted that in the energy division, Dagang Nexchange secured two mini-bids worth RM7 million from Petronas Carigali which will be recognised in 2Q17.
Going forward, the research arm expected Dagang Nexchange to secure more mini-bids as the group is the sole local player competing under the umbrella contract.
“However, management revealed that margins have not been as lucrative as previously expected given that competition remains tight,” it said.