PETALING JAYA: The resolution of a legal dispute involving Dagang Nexchange Bhd
’s (Dnex) semiconductor wafer foundry business could pave the way for a re-rating of the stock, with TA Research expecting renewed investor confidence as a major uncertainty hanging over the group is finally lifted.
Dnex has reached a global settlement with two companies linked to Beijing Integrated Circuit Advanced Manufacturing and High-End Equipment Equity Investment Fund Center (CGP Fund), ending legal proceedings and arbitration involving shareholders of SilTerra Malaysia Sdn Bhd.
The settlement leaves the shareholders’ direct stakes in SilTerra unchanged, with Dnex Semiconductor holding 60% and CGP’s investment vehicle holding the remaining 40%.
Both shareholders have reaffirmed their commitment to supporting SilTerra’s next phase of growth, including through further capital injections where required, subject to relevant approvals.
“Overall, we view the settlement positively, as the prolonged legal dispute has weighed on investor sentiment and remained a key overhang on the stock.
“Management can now focus fully on improving SilTerra’s operating performance and driving its next phase of growth,” TA Research said in a note.
To recap, Dnex and CGP Fund became involved in legal and arbitration proceedings in 2022 relating to a proposed investment in Dnex Semiconductor and disagreements over appointments to SilTerra’s board of directors.
Following the settlement, the research house has raised its target price-to-earnings (PE) multiple for the semiconductor segment from 35 times to 40 times to reflect the removal of the legal overhang and improved confidence in its growth outlook.
Consequently, the target price was raised to 73 sen from 66 sen. TA Research has reiterated its “buy” call on the Dnex stock.
“Despite the recent share price appreciation, the stock is still trading at only 13.5 times PE for the financial year 2027 (FY27).
“We believe this valuation has yet to fully reflect SilTerra’s artificial intelligence-driven growth potential, upside from the oil and gas upcycle, and the group’s growing recurring digital revenue.”
According to MarketsandMarkets, the global silicon photonics market was valued at US$2.2bil in 2024 and is projected to reach US$9.7bil by 2030, representing a robust compound annual growth rate of 29.5% between 2025 and 2030.
Quoting Dnex management, TA Research said average selling prices for the semiconductor segment are expected to increase by 5%-10% in the second half of 2026 (2H26), with further growth anticipated in 2027.
Additional equipment is expected to come onstream progressively in 2H26, increasing wafer production capacity.
“Management also plans to expand capacity further to meet growing demand.
“Emerging technology products are expected to contribute more than 60% of the semiconductor segment’s revenue once the additional capacity comes onstream.
“Against this backdrop, stronger shareholder alignment should better position SilTerra to execute its expansion plans and capture these growth opportunities,” according to TA Research.
The research house has maintained its earnings forecasts for FY26-FY28.
