DNeX announces 2Q FY2020 financial results

Dagang NeXchange Berhad (“DNeX”) has announced its results for the second quarter ended June 30 (“2Q FY2020”), and the six months period ended June 30 (“1H FY2020”).

In 2Q FY2020, DNeX reported a revenue of RM62.0 million as compared to RM72.2 million in the previous year’s corresponding period (“2Q FY2019”). The decrease in revenue was attributable to lower contribution from the Information Technology (“IT”) segment, which declined by 36 per cent year-on-year (“y-o-y”).

Lesser trade transactions were recorded during the Movement Control Order (“MCO”) implemented by the Government of Malaysia to combat the Covid-19 pandemic thus affecting the Group’s trade facilitation and e-Commerce division.

In addition, during this period DNeX also experienced a slowdown in project implementation in its system integration and consultancy projects.

However, this was mitigated by revenue from the Energy segment, which grew by 86 percent y-o-y resulting from work done on provision of engineering, procurement, construction and installation services for a water injection pipeline project as well as work orders from ExxonMobil Exploration and Production Malaysia Inc.

The IT division contributed 61 percent to the Group’s 2Q FY2020 revenue while the remaining 39 per cent was from the Energy division.

During the quarter, the Group incurred one-off non-cash impairment loss totalling RM31.3 million namely impairments on other investment in unquoted shares of RM3.7 million; receivables of RM3.5 million; property, plant and equipment of RM6.3 million; and intangible assets of RM17.8 million. This led the Group to report a loss after tax (“LAT”) of RM26.4 million in 2Q FY2020.

For 1H FY2020, the Group recorded revenue of RM125.7 million and LAT of RM20.6 million. Without the one-off non-cash impairment loss totalling RM31.3 million, the Group managed to report an operating profit of RM7.9 million in 1H FY2020 amidst a challenging business landscape.

Mohd Azhar Mohd Yusof, Acting Group Managing Director of DNeX said, “The Group remains focused on identifying opportunities for revenue growth, while pursuing cost optimisation activities to drive operational efficiencies and achieve earnings sustainability. Leveraging on the Group’s core competencies that have been developed over the years across both our IT and Energy businesses, we are proactively bidding for contracts that will contribute to the long-term growth of the Group.”

DNeX also announced today that it has entered into a head of agreement (“HOA”) with Ping Petroleum Limited (“Ping”) for DNeX to make an offer through Ping to acquire the remaining equity interest in Ping not currently owned by DNeX. DNeX’s investment in Ping stood at RM216 million as at Dec 31, 2019.

Since 2016, Ping has built a successful track record and balanced portfolio in the UK North Sea, including 50 per cent of the Anasuria Oil Cluster, consisting of an operated portfolio of producing oil fields as well as other working interest in various assets within the North Sea, which are in development and exploration stage and have yet to commence production.

As at Ping’s last audited accounts for the financial year ended June 30, 2019, Ping recorded revenue of US$96 million or RM401 million and profit after tax of US$29 million or RM121 million.  As at June 30, 2019, Ping has no bank borrowings with cash and cash equivalent at US$51 million or RM213 million and total equity of US$162 million or RM676 million. (Exchange rate USD1.00 : RM4.1755)

Azhar said the move to take full control of Ping will enable DNeX to benefit from a full consolidation of Ping’s earnings and future growth with its well-balanced portfolio of production, development and exploration assets.  Ping is estimated to have proved and probable (“2P”) oil reserve of 25 million barrels equivalent (“MMboe”).

Upon completion of the above proposal, Ping will be a wholly-owned subsidiary of DNeX and DNeX will be able to fully consolidate the revenue and earnings of Ping, which is expected to enhance DNeX’s financial performance in the future.

The oil and gas sector has also shown improvements with Brent Crude benchmark increased to US$46 per barrel as at Aug 25 from the low of US$19 per barrel on April 21

“DNeX is strongly confident that the global oil price will remain favourable in the longer term despite the short term post Covid-19 recovery challenges supported by OPEC’s historic production cut and production declines in the United States” said Azhar.

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