KUALA LUMPUR (Feb 16): Dagang NeXchange Bhd's share price (DNeX) hit a record high of RM1.27 on Wednesday (Feb 16) and was the most actively traded stock of the day on the local bourse.

The stock opened two sen higher at RM1.15 and climbed another 12 sen to close at RM1.27, up 12.39% from Tuesday's close, after some 272.72 million shares were traded. At current price, the company's market capitalisation stands at RM3.82 billion.

The reason behind interest in DNeX is unclear, but investors might have turned more bullish on its prospects given greater coverage of the company.

CGS-CIMB has initiated coverage on DNeX with a target price of RM1.60.

In a note on Wednesday, the research house said DNeX is well positioned to benefit from SilTerra's turnaround, underpinned by an ongoing semiconductor chip shortage and structural shift towards More-than-Moore (MtM) devices. It projected 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 in 1HCY22F that will take up 80% of its capacity," it said.

CGS-CIMB projected 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 had 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.