It said on Friday DNeX does not have any direct competitors, given its unique exposure in the IT and O&G sectors.“However, we see My EG, Prestariang and Datasonic as proxies for the local IT sector. We deem KNM, Wah Seong and Uzma comparable peers in the oil and gas space. Its FY17F P/E (based on Bloomberg consensus) is at a deep 66%-75% discount to IT providers and 28%-48% discount to (O&G) players,” it said.
To recap, DNeX is the single exclusive operator of the National Single Window (NSW) platform, providing trade facilitation services to the Customs Department for over 25 years.
The company was awarded an RM45mil contract to install the first phase of the Vehicle Entry Program (VEP) at the Malaysia-Singapore border in Johor this year.
The government plans to implement the VEP project at the other 12 road entry points in Malaysia in stages. The second phase will cover Malaysia’s border with Thailand and the third phase, the Malaysian borders with Brunei and Indonesia. There is also potential for a recurring annual maintenance contract with regards to the VEP system.
NSW services contributed the bulk of its earnings in FY12-15. In September 2016, the government awarded DNeX a two-year extension on its contract as the exclusive operator of NSW.
CIMB Research said DNeX has embarked on a new O&G venture, after completing the acquisition of OGPC for RM170mil in 3Q16.
OGPC reported average annual net profit of RM20mil in 2012-2015. DNeX was the only local service provider awarded a 3-year drilling and services contract by Petronas Carigali in 2Q16.
DNeX hired a new management team in 2014, led by managing director Zainal Abidin Jalil, who has many years’ experience in the upstream O&G industry and power generation utilities.
DNeX invested US$10mil (RM40mil) to acquire a 30% stake in Ping Petroleum (Ping), an independent upstream service provider with a 50% stake in the producing Anasuria cluster, North Sea.
“The investment amount implies a low entry cost of below US$2 per barrel (historical average for comparable transactions). Management expects annual associate profit contribution of RM18m, based on mid-US$40s per barrel crude oil price.
“Based on Bloomberg consensus estimates, DNeX trades at forward FY17F P/E of 6 times, more than 0.5 standard deviation below its historical mean of 10 times. Consensus expects strong earnings delivery in FY16-17F, which implies a staggering FY15-17F net profit CAGR of 88%.
“This is likely based on management’s guidance of RM70mil to RM80mil net profit in FY17F, driven by strong earnings from O&G and VEP projects,” it said.
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