HLIB: 'Worst-case scenario' for DNEX 4456 DAGANG NEXCHANGE BERHAD priced in after Thursday’s heavy sell-off
KUALA LUMPUR (Nov 18): Hong Leong Investment Bank (HLIB) Research is of the view that the market has pretty much priced in the “worst-case scenario” for Dagang NeXchange Bhd (DNeX) — which is a highly unlikely outcome of its 60%-owned SilTerra Malaysia Sdn Bhd breaching the 55% Malaysian entity regulation set by the Ministry of International Trade and Industry (MITI).
Nonetheless, HLIB is taking the opportunity to reduce SilTerra’s price-earnings multiple to 20 times from 30 times. However, it is still at a premium to Taiwan Semiconductor Manufacturing Co’s (TSMC) five-year mean forward multiple of 17 times, reflecting the scarcity premium of a listed wafer fab foundry on the local stock exchange.
With that, HLIB’s target price (TP) for DNeX was lowered to RM1.32 from RM1.74 previously, while maintaining a “buy” call. Note that if were to strip out SilTerra’s entire valuation out of DNeX, its TP would fall to a mere 47 sen.
On Thursday (Nov 17), DNeX shares were bashed down by as much as 30 sen or nearly 40%, before settling at 50.5 sen, down 25 sen or 33.11%, slashing its market value to RM1.59 billion.
HLIB said the breach of the 55% regulation is highly unlikely because there is no subscription exercise that would lead to Beijing Integrated Circuit Advanced Manufacturing and High-End Equipment Equity Investment Fund Center (CGP) being a 33.3% shareholder of DNeX Semiconductor — a wholly owned subsidiary of DNeX — hence no possible breach in SilTerra’s shareholding structure.
“This, in turn, means that the outcome in which SilTerra loses its operating licence seems far-fetched.”
DNeX held an analysts’ briefing on Thursday following the commencement of its arbitration proceedings against CGP, a 40% equity partner of SilTerra. The remaining 60% is owned by DNeX.
“Throughout the briefing, we were guided that SilTerra’s operations and long-term agreements are not affected in any way. The unit is doing business as usual with its operating licence still intact. We were also told that DNeX’s relationship with CGP is still in good shape.
“The group views that the purpose of the arbitration is the best way to settle this impasse between DNeX and CGP. By seeking to have the agreement declared null and void, the matters would be resolved, and this will protect the interest of DNeX shareholders and SilTerra, and avoid any breach in the condition of the licence,” said HLIB.
In March 2021, Khazanah Nasional Bhd sold then loss-making SilTerra to DNeX and the China-based equity fund for RM273 million cash.
DNeX and CGP have committed to a capital injection of at least RM200 million by way of subscribing to new shares to be issued by SilTerra. Based on DNeX’s 60% stake, the capital injection by DNeX will amount to about RM120 million.
Both parties sought to opt for the issuance of irredeemable convertible preference shares (ICPS) in DNeX Semiconductor, amounting to RM100 million, to be issued to and subscribed by MIMAS. This would result in MIMAS holding a 33% stake in DNeX Semiconductor.
The point of contention is whether prior approval is needed from MITI for the proposed investment.
MIMAS is of the view that such approval is not required, and maintains that the shareholders' agreement and subscription agreement, both dated Jan 21, 2022, are valid and enforceable.
However, DNeX disagrees.
“Vide MITI’s letter dated Feb 28, 2022, DNeX and CGP learned that prior approval from MITI is required in relation to the proposed investment,” said DNeX in the filing.
“DNeX and DNeX Semiconductor consider such approval as necessary, more so in light of the terms and conditions of the shareholders’ agreement and subscription agreement, which provide for MIMAS becoming a shareholder upon issuance of the ICPS and not their conversion. If so, this puts the [manufacturing] licence, and thus operations of SilTerra, at risk.”
http://www.theedgemarkets.com/article/hlib-worstcase-scenario-dnex-priced-after-thursdays-heavy-selloff
Singapore Investment
-
-
-
-
Getting the Most Affordable Travel Insurance2 hours ago
-
10 Best Christmas Gifts on a Budget2 hours ago
-
-
-
-
-
-
How Do I Change My Will? Expert Tips3 hours ago
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
I Quit the Rat Race2 days ago
-
Investing in Cyprus: A Complete Guide2 days ago
-
-
-
-
-
-
Migration of website3 days ago
-
-
-
-
-
-
-
Another PSLE result release day5 days ago
-
-
-
Taiwan Retreat 20231 week ago
-
-
Abandon REITS?1 week ago
-
Relocation Costs1 week ago
-
-
-
-
-
-
-
-
-
-
-
-
Finance Investment Movement 392 weeks ago
-
-
-
-
-
-
-
Bought gold and bitcoin2 weeks ago
-
随心笔:天堂2 weeks ago
-
-
-
PRIME US REITs 3Q Updates2 weeks ago
-
-
-
-
-
-
-
Weekend brain food IX3 weeks ago
-
-
-
-
Monthly Summary of October 20233 weeks ago
-
-
-
Portfolio and life update: Q3 20244 weeks ago
-
Portfolio Summary for October 20234 weeks ago
-
Portfolio (Oct 31, 2023)4 weeks ago
-
-
Lendlease REIT AGM 20234 weeks ago
-
-
Portfolio - Oct 20234 weeks ago
-
-
-
The Hidden Side of Rising Rates4 weeks ago
-
-
iFAST 3Q23 highlights4 weeks ago
-
-
-
Bon Voyage Le Le5 weeks ago
-
Promising deal from Webull5 weeks ago
-
-
-
Markets going down5 weeks ago
-
-
-
-
-
-
-
-
Banks and Miles Report – Oct 20231 month ago
-
-
Sep 2023 Portfolio1 month ago
-
Lentor Hills Residences2 months ago
-
-
-
Bit_Coin - UPDATE2 months ago
-
-
August 2023 Portfolio Updates2 months ago
-
My dad did not do his CPF nomination2 months ago
-
-
-
-
-
-
Mid Year Review 20234 months ago
-
-
-
Hello SP Group, I'm Back!5 months ago
-
Mid-Year Portfolio Update5 months ago
-
-
-
-
I am in debt5 months ago
-
Investment Summary - May 20235 months ago
-
A New Light6 months ago
-
-
-
Snack Empire – Crunch Time7 months ago
-
-
-
-
-
-
-
Demoralized10 months ago
-
2022 Thoughts, Hello 2023!10 months ago
-
Series of Defaults for Maple Finance11 months ago
-
Takeaways from “Sea Change”11 months ago
-
Do I Still Believe In Financial Freedom?11 months ago
-
Greed is Coming Back11 months ago
-
-
-
-
-
-
-
-
-
-
-
-
What is Overemployment1 year ago
-
-
-
-
-
-
-
-
-
-
-
Home
articles
DNEX
HLIB: 'Worst-case scenario' for DNEX 4456 DAGANG NEXCHANGE BERHAD priced in after Thursday’s heavy sell-off