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DNeX records net profit of RM47.5 million in 4Q FY2023

Cyberjaya, 28 August 2023 – Dagang NeXchange Berhad (“DNeX”) has announced its financial results for the fourth quarter ended 30 June 2023 (“4Q FY2023”) where the Group remained profitable amidst challenging business environment.

In 4Q FY2023, the Group reported a net profit of RM47.5 million against RM275 million in revenue. In terms of revenue breakdown, the Technology division contributed 47 per cent to total revenue, while the Energy and Information Technology (“IT”) divisions contributed 33 per cent and 20 per cent respectively to revenue.

The global semiconductor industry market affected the Group’s Technology division where it recorded RM128.1 million in revenue compared to RM254.1 million in 4Q FY2022. Revenue from the Energy division stood at RM91.7 million as compared to RM135.7 million in the same quarter last year, affected by lower average oil prices of USD74.7 per barrel, from USD115 per barrel earlier. Revenue from the Information Technology (“IT”) division stood at RM55.3 million from RM60.8 million in the same quarter last year due to conclusion of several IT projects in the previous year.

According to Tan Sri Syed Zainal Abidin Syed Mohamed Tahir, Executive Chairman of DNeX, rising interest rates globally have led to recessionary fears and global slowdown in consumer spending resulting in lower demand for semiconductors in consumer electronics like PCs, smartphones and tablets.

However, this cyclical downturn is expected to be short-term with long-term growth prospects looking positive driven by new technologies in artificial intelligence, IoT and 5G technology, he said, adding that the Group remains focused on enhancing production of emerging technologies, such as microelectromechanical systems (“MEMS”) and Silicon Photonics which will give better average selling price and profitability. In addition, the Group has also secured new customers with on-going product qualifications which will benefit the Group.

“The improving economic outlook in the oil and gas (“O&G”) sector will spur activities across the O&G upstream and downstream sector. PETRONAS’ RM300 billion capital expenditure for 2023-2027 is a positive sign for OGPC Group. We are accelerating our efforts to strengthen and expand OGPC’s market presence within the O&G sector,” he said.

He said through Ping Petroleum Limited, the Group will focus on developing the Malaysian O&G assets, starting with the Meranti Cluster, a brownfield asset offshore Kuala Terengganu.

“This is in line with Ping’s strategy of diversifying the O&G asset portfolio across geographical locations. We are confident to replicate our expertise in managing late-life brownfield O&G assets by keeping production costs under USD30 per barrel, which has been effective at the Anasuria Cluster in the North Sea, United Kingdom.

He added that the reversal of deferred tax liability arising from the enactment of the Energy Profit Levy (“EPL”) by the UK Government to the profit or loss statement by 31 March 2028 will have positive impact as it reduces the Group’s tax expense during the window where the EPL applies.

In the IT division, the Group aims to be the preferred technology partner and is developing solutions that drive digitalisation to enhance efficiencies and lower operating costs for users.

“These include the development of a SuperApp for trade facilitation, a one-stop portal to easily connect exporters and importers with Government agencies and trade enablers such as logistics players, insurance and banks. It simplifies trading operations and allows users to operate, pay and manage trade operations from their mobile devices.

We also recently introduced EGADS (“ERP for Government Agency Digital System”), an accrual-based accounting system built on the latest SAP Cloud Platform (S/4HANA) that complies with the Standard Accounting for Government Agencies (“SAGA”), Self-Assessment SAGA Compliance (“SASAR”) and the Malaysian Public Sector Accounting Standard (“MPSAS”),” said Tan Sri Syed Zainal Abidin Syed Mohamed Tahir.

Building upon the Group’s expertise as the operator of National Single Window for Trade Facilitation (“NSW”) since 2009, and successful completion of nationally critical, large-scale IT projects for the Malaysian Government, such as Integrated Government Financial and Management System (“iGFMAS”), and tax self-assessment system by the Inland Revenue Board of Malaysia (“IRB”), the Group is actively tendering for digitalisation projects from the public and private sectors within Malaysia as well as abroad.

As announced on 17 August 2023, the financial year end of the Group has been changed from 30 June to 31 December. The next audited financial statements shall be for a period of 18 months from 1 July 2022 to 31 December 2023, and thereafter, the financial year end shall be 31 December for each subsequent year.

For the 12 month period ended 30 June 2023 (“12M FY2023”), revenue stood at RM1.301 billion from RM1.457 billion in the corresponding period of the previous year (“FY 2022”).

In 12M FY 2023, DNeX reported a net loss of RM118.7 million. This was mainly due to one-off nonoperational adjustments incurred during the year such as deferred tax liability expenses due to enactment of the EPL by the UK Government, impairment of assets and reversal of deferred tax assets. After adjusting for these items, the Group’s “normalised” net profit stood at RM106.1 million in 12M FY2023.

The Group generated a net cashflow from operating activities of RM186.3 million in 12M FY2023. DNeX remains in a positive net cash position with total cash of RM760.6 million exceeding total borrowings of RM288.9 million as at 30 June 2023.