KUALA LUMPUR (Feb 16): CGS-CIMB Research has initiated coverage on Dagang NeXchange Bhd (DNeX) at RM1.13 with an “add” rating and target price of RM1.60.

In a note Wednesday (Feb 16), the research house said DNeX is well positioned to benefit from SilTerra’s turnaround, underpinned by ongoing semi chips shortages and structural shift towards More-than-Moore (MtM) devices.

The research house said it is projecting SilTerra to invest over RM900 million capex in FY22-24F.

“The group plans to increase its mask layer (ML) capacity by 20% to 10m ML/annum by CY23F.

“We expect SilTerra to secure two new long-term agreements (LTAs) in 1HCY22F that will take up 80% of its capacity,” it said.

CGS-CIMB projects DNeX to post a three-year core EPS CAGR of 453% (FY21-24F) driven by 1) higher wafers ASP, 2) higher wafers production volume on the back of new capacity expansion, 3) higher average crude oil prices for Ping Petroleum Ltd, and 4) higher production volume at Ping on the back of its new capex programme.

“DNeX also enjoys a lower effective tax rate given that SilTerra has over RM12 billion as of Jul-21 in unrecognised deferred tax assets that could be offset against its future profits.

“Note that we have yet to account for: 1) contributions from emerging technology platforms like silicon photonics that command premium ASP, and 2) commercialisation of Ping’s Avalon oilfield,” it said.