KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) remains upbeat on Dagang NeXchange Bhd's (DNeX) outlook, given its strong foothold in both the front-end semiconductor and upstream energy spaces.
DNeX recently announced that it had signed a memorandum of understanding (MoU) via its 90 per cent-owned Ping Petroleum Ltd. with Cerulean Winds to kick start a partnership initiative to deliver a dedicated offshore floating wind turbine for the Avalon greenfield development in the Central North Sea in the UK.
From the announcement, HLIB Research gathered that Ping Petroleum and Cerulean Winds plan to set up a joint venture (JV) company to deploy and operate a floating wind turbine, which will power the Sevan Hummingbird FPSO vessel acquired by Ping Petroleum in early July this year from Teekay Corp.
"We are comforted, and we applaud the DNeX's efforts to venture into more environmental, social, and governance (ESG) friendly measures to reduce greenhouse gas emissions (GHG) emissions via the reduction of fossil fuel usage.
"Also from the announcement, the Avalon greenfield is expected to produce first oil by mid-2025, a delay from its previous guidance of mid-2024," it said.
HLIB Research highlights that at current levels, DNeX is trading at a bargain forward valuation multiple of only 11.5 times and 9.5 times for the financial years 2023 (FY23) to FY24, respectively, in its entirety – based on the firm's conservative earnings forecast.
The bank-backed research firm acknowledges that the anticipated rate hikes from the US Fed in the second half of 2022 (2H22) may make the technology sector more vulnerable to trade volatility in the near future.
"While timing a perfect entry point may be challenging, we believe that DNeX is currently trading at unwarranted levels given its bright growth prospect.
"We maintain our Buy call on DNeX with an unchanged target price of RM1.69 per share," it added.