DAGANG NEXCHANGE BHD
By CIMB Research Add Target price: RM0.74
CIMB Research is cautious on the near-term outlook for Dagang Nexchange Bhd (DNex) due to soft market environment and margin compression in the oil and gas segment.
The research house recently met with the group’s management to discuss its first-half results and outlook for the second half of 2017.
However, it maintained its 30% revenue and 20% net profit growth guidance for financial year 2017 on the back of new recurring income in the IT division and fullyear profit contribution from its stake in Ping Petroleum Ltd.
The group’s pre-tax profit from the IT division surged 35% year-on-year to RM22.3mil during the first half, driven by growth in its trade facilitation business and new recurring income from operation and maintenance of the vehicle entry permit and road charge system.
The energy division’s pre-tax losses (excluding Ping), meanwhile, narrowed to RM2.9mil in the first half compared with RM4.1mil a year ago due to higher utilisation at the DNeX Oilfield (DOS).
Ping recorded RM8.5mil associate profit contribution in the first half, mainly due to higher average crude oil prices.
There was no year-on-year comparison as the 30% stake acquisition in Ping was only completed at the end of the second quarter of financial year 2016.
The research house cut its FY17-FY19 earnings per share forecast by 6%-10% to account for weaker earnings from wholly-owned subsidiary OGPC Sdn Bhd and DOS, but still expects stronger earnings delivery in the second half.