If you miss Hibiscus, maybe can consider DNEX.
DNEX - Technical perspective: Signs of bottoming up to retest RM0.255-0.29 levels amid dragonfly doji pattern
Author: HLInvest | Publish date: Tue, 13 Dec 2016, 09:30 AM
HLIB has a Not-rated SOP target price of RM0.34 ( 41.6% upside). DNEX (formerly known as TIME), was primarily an ICT provider. In recent years, the group has diversified into the energy sector as its 2nd core business. Going forward, DNEX is expected to derive 50% of its earnings from IT & e-services and the remaining from energy-related businesses. Valuation is undemanding at 7.3x FY17 P/E (6.4x ex-cash of 3.1sen), supported by 34% earnings CAGR from FY15-18 and decent yields of 3.3% for FY17-18.
Traditional bread and butter business. The group’s IT & e-services business is still being anchored by its bread and butter National Single Window (NSW) which has seen its contract being renewed by the government for another 2 years to Sep 2018. The two-year extension of NSW contract allows DNEX to prolong its exclusivity on trade facilitation system while establishing new income stream from the Vehicle Entry Permit (VEP) contract.
To recap, apart from steady earnings from NSW, its ICT earnings is also fueled by the VEP contract secured in Feb 16 from the Ministry of Transport at the Johor-Singapore border with 2 major venue streams: CAPEX (RM45m) and OPEX maintenance (RM20m p.a). If the project is successful, the VEP software solution could be replicated on Thailand Malaysia border also which could bring about additional income streams.
Beneficiary of ongoing oil prices recovery. DNEX is morphing into something bigger from ICT to energy businesses, via the acquisition of OGPC, an equipment provider for O&G industries covering the whole chain from upstream to downstream in 2014. Subsequently in 2015, DNEX invested in 30% stake of Ping Petroleum, an E&P company at its early stage with 50% stake in the Anasuria Cluster, North Sea which is jointly-owned with Hibiscus Petroleum. This mature oilfield is now cash flow positive while providing further income for DNEX at associate level.
Potential downtrend reversal to test mid to long term RM0.255-29 levels. DNEX’s share prices retraced 11.3% from a 52-week high of RM0.31 (4 & 5 Oct) to a low of RM0.225 (7 Dec) before ending at RM0.24 on 9 Dec. The stock is ripe for imminent technical rebound following the formation of Dragonfly Doji and upticks in technical indicators, signaling tapering selling pressures.
A decisive breakout above RM0.255 (38.2% FR and 100-d SMA) will spur prices higher towards RM0.275 (61.8% FR) before heading towards our LT objective at RM0.29 (76.4% FR). Key supports are situated near RM0.23 (9 Dec low) and RM0.225. Cut loss at RM0.22.
Source: Hong Leong Investment Bank Research - 14 Dec 2016