Daily Star: DNEX (4456.KL)

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Company that offers most of the software solutions to Malaysia’s cargo and trade business.

Business Background:

1. E-commerce services provider
Main Services:
i) “eWork Permit”: A government project in building of a new back-end system for Bukit Megah Sdn Bhd for the rehiring programme of illegal foreign workers. (Link: DNeX sees 7.46% stake traded off-market)

ii) Motor approved permits and private jetty permits


iii) Vehicle Entry Permit and Road Charges (VEP-RC): In 2016 and Jan 2017, DNeX was awarded two contracts to develop, install and maintain the VEP & RC system and equipment for five years at the Malaysia-Singapore border in Johor. Besides, DNeX is still in talks with government regarding the Thai border VEP-RC

iv) Trade Facilitation: With more than 20 years of making Business-to-Government transactions seamless, DNeX innovates Business-to-Business offerings with the country’s most comprehensive cargo and trade management software.

v) Cyber Security, RFID Warehouse Management System, IT solutioning, Global Halal Exchange, etc

2. Oil and Gas services provider
To diversify its revenue apart from IT services, DNeX embarked on a new oil and gas venture by acquiring OGPC in 2016. Then, in the same year, DNeX also acquire a 30% stake in Ping Petroleum, an upstream oil and gas service provider with a 50% stake in the producing Anasuria cluster in the North Sea. DNeX was the only local service provider awarded a three-year drilling and services contract by Petronas Carigali in 2016.
i) Upstream: Participating in the area of niche Oil and Gas assets, particularly in brownfields redevelopment and production fields by acquiring strategic production assets in fiscal transparent locations.
ii) Downstream: Through subsidiary OGPC Sdn Bhd, DNeX offers quality oil and gas equipment to serve our diverse international clientele. We import and distribute the industry’s best technical products from reputable manufacturers around the world. From pumps and compressors to gas turbine filtration systems, we offer a range of products and technical support that are fit-for-purpose under various service conditions.

Recent News:

1. On 7 July 2017, one of DNEX’s oil & gas unit OGPC secured a two-year contract to supply up to 100 units of portable container system (PCS) for mini pump stations nationwide. It is one of the company’s maiden attempt in expanding into the downstream segment. (Link: CIMB Research retains Add for DNex, target price 75 sen Read more at http://www.thestar.com.my/business/business-news/2017/07/07/cimb-research-retains-add-for-dnex-target-price-75-sen/#1u3z2lUIyxR8AhXD.99)

Major Shareholder: (As at 28 Feb 2017)


1. Censof Holdings Bhd: 17.53% (P/E: 11.75, Stock Price: 0.32)
2. Arcadia Acres Sdn Bhd: 13.26% (Arcadia Acres Sdn Bhd is an investment holding vehicle, which is 78.0 per cent owned by Encik Zainal Abidin Jalil, Group Managing Director of DNeX and 22.0 per cent owned by Encik Wan Azryn Wan Ab Rashid, Chief Executive Officer of a subsidiary of DNeX, DNeX Oilfield Services Sdn Bhd.)
3. Azman Karim: 11.09% (Non-Independent Executive Director of DNeX, Managing Director of OGPC Sdn. Bhd)
4. Khoo Kok Seng: 6.10% (Cofounder of OGPC Sdn. Bhd)
5. Abdul Manaf Shariff: 3.81% (Cofounder of OGPC Sdn. Bhd)

Price Movement:

1. Major uptrend starts from 15/02/2017 to 03/05/2017 for around 2.5 months. Price rose from 0.253 to 0.550 for around 117%!
2. Moving sideways between 0.58 and 0.60 until present. Volume transacted is decreasing.

Fundamental Strength:

1. P/E: 4.15 (Compared to MyeG which was another monopoly player that received government project with a high P/E of 40)
2. 0 debt company
3. Net profit margin: 72.96%
4. Estimated Announcement Date: 16-Aug-2017
5. Price to Book Ratio: 2.47
6. EPS (MRQ) vs Qtr. 1 Yr. Ago: +28.57

Technical Strength:

1. SMA 60 days remain in uptrend.
2. MACD above 0 and is moving sideways.
3. TSI above 0 and is moving sideways.

Risks:

1. Volatile oil price
2. The national single window for trade facilitation — may come under pressure when the Malaysian Royal Customs Department switches to a new framework called uCustoms. DNeX’s national single window contract with Customs was recently extended to September 2018.
The national single window is a trade facilitation system that allows exporters and importers to conduct all necessary Customs clearance processes through an online portal. DNeX, which developed the system some years ago, is the only company in the country that provides it. But under uCustoms, it will be one of two service providers involved in the trade facilitation process. (Link: Dagang NeXchange bags another high-margin job)

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