PCS installations to drive DNeX second half earnings

Research house CGSCIMB says firm expects to install 30 units

PETALING JAYA: Dagang Nexchange Bhd (DNeX) is optimistic of recording stronger earnings in the second half of 2018, driven by the anticipation of higher portable container system (PCS) installations.

In a report yesterday, CGSCIMB said the IT services management company expects to install at least 30 units of PCS in the second half of 2018, compared with just seven in the first six months of this year.

“Moreover, the group expects to see maiden contribution from the Touch ‘n Go e-wallet network connectivity project. To recap, the group expects the project to contribute RM20mil revenue per annum, with an estimated 35% net profit margin in the first three years after the project is operational.”

Additionally, the research house said it is encouraged by the stronger performance from its 30% associate, Ping Petroleum, which recorded 48.3% year-on-year net profit growth in the first half of 2018.

“Ping is poised to deliver stronger earnings in 2018, driven by higher average crude oil prices and higher sales volume. Moreover, the group also announced a 20% increase in Ping’s total proven and probable oil reserves to 27 million barrels (compared with 23 million recorded during the acquisition in 2015).”

DNeX’s net profit for its second quarter ended June 30 grew 2% to RM12.16mil from RM11.93mil in the previous corresponding period, boosted by recurring income from operating and managing its vehicle entry permit and road charge system.

Earnings were also bolstered by continued growth in the group’s business-to-business (B2B) and business-to-government (B2G) segments.

In a filing with Bursa Malaysia on Monday, DNeX said revenue in the second quarter increased to RM51.18mil from RM49.11mil a year earlier.

For the six-month period, meanwhile, DNeX’s net profit rose to RM28.4mil from RM27.01mil in the previous corresponding period, while revenue improved to RM122.29mil from RM92.93mil a year earlier.

TA Securities in a report yesterday said the company’s earnings were within consensus.

“We note that DNeX’s PCS contract has yet to recognise any revenue and we expect two liftings in a single quarter for the Anasuria field. Thus, DNeX’s 2018 earnings will likely be back loaded.

“We note that DNeX expects to deliver 50 units of PCS in 2018 valued at around RM25mil. Although delivery has been delayed due to site readiness issues, DNeX is confident it can meet its 2018 target of 50 units delivered.”

The research house is maintaining a ‘Buy’ call on DNeX, as the company directly benefits from the increase in crude oil prices.