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Surging semiconductor ASPs, higher oil prices to boost DNeX's earnings

Hong Leong Investment Bank (HLIB Research) said a check with DNeX showed that wafer ASPs continues to increase.

KUALA LUMPUR: Dagang NeXchange Bhd (DNeX) should register uninterrupted quarterly earnings growth over the next six to nine months on Silterra Malaysia Sdn Bhd's surging product average selling prices (ASPs), increasing wafer shipments and soaring crude oil prices.

Hong Leong Investment Bank (HLIB Research) said a check with DNeX showed that wafer ASPs continues to increase.

"DNeX has reiterated that net ASP per wafer is still on an uptrend and is expected to peak in the fourth quarter (Q4) of the financial year 2022 (FY22) and hover at US$600 to US$625 in FY22-FY23," it said in a note today.

HLIB Research said DNeX is planning for another expansionary capital expenditure (capex) of US$150 million to US$200 million in end-2022 to ramp up its production for emerging technology to about 10 per cent of total capacity.

The capex will entail a new building, an extension from Silterra's existing plant in Kulim currently.

The company aims for this new plant to be operational in early-2024.

Meanwhile, the soaring crude oil prices throughout Q3 FY22 would also directly benefit DNeX's 90 percent-owned Ping Petroleum via its oil-producing assets in Anasuria.

As a point of writing, HLIB Research said  Brent crude oil price averaged at about US$96 per barrel year to date, which is significantly higher than its Q2 FY22 realised price of US$71 per barrel.

"DNeX is targeting for Ping's 100 per cent-owned Avalon Oilfield (greenfield) to produce its first oil in July 2024.

"Based on our findings, we gather that the Avalon Oilfield will potentially more than quadruple Ping's output from 2,300 barrels of oil equivalent per day (bepd) to 9,000-10,500 bepd, based on our internal estimates – which would boost Ping's earnings by 3-4x," it said.

HLIB Research has maintained its 'Buy' call on DNeX, with an unchanged target price of RM1.64.


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