KUALA LUMPUR (Aug 28): Technology, energy and IT company Dagang Nexchange Bhd (DNeX) reported a 70.4% drop in its net profit to RM47.51 million for the April-June 2023 period, from RM160.59 million in the corresponding three months in the previous year, as its tech business fell into a loss amid lower wafer shipments.

The tech business reported a loss before tax of RM25.72 million, as opposed to a profit before tax (PBT) of RM85.66 million previously.

At the same time, the group's energy business was affected by a lower net average selling price of Brent crude oil of US$74.7 per barrel (/bbl) during the quarter, compared with US$115.01/bbl previously, which resulted in PBT dropping about 30% to RM22.4 million, from RM31.97 million. The conclusion of some projects in its IT segment also led to a 22.6% drop in PBT to RM21.89 million, from RM28.26 million.

Earnings per share dropped to 1.51 sen from 5.09 sen, DNeX's bourse filing showed. No dividend was declared. The group recently changed its financial year end from June 30 to Dec 31.

Group revenue fell about 40% to RM275.02 million from RM450.57 million, with its biggest contributor, the technology business, seeing a 49.6% topline drop to RM128.08 million from RM254.09 million.

“The group’s energy [segment’s] revenue was also lower by RM44.04 million as compared to the preceding year’s corresponding quarter (4QFY2023: RM91.68 million; 4QFY2022: RM135.72 million). While [the] IT segment’s revenue was reduced by RM5.49 million (4QFY2023: RM55.26 million; 4QFY2022: RM60.75 million), as compared to the preceding year’s corresponding quarter, due to the conclusion of certain projects,” DNeX said in a bourse filing.

For the 12 months ended June 30, 2023, the group reported a net loss of RM118.66 million, compared to a net profit of RM549.59 million in the corresponding 12 months in 2022, dragged primarily by a 98.4% PBT decline in its technology business to RM7.96 million, from RM490.86 million.

Excluding the one-off negative goodwill from business combination of RM264.51 million and a one-off impairment loss of RM9.51 million that the group recorded in the previous year, the group would have made a PBT of RM179.91 million in 12MFY2023, down RM178.29 million from the RM358 million it made previously, due to lower revenue.

Cumulative revenue dropped to RM1.3 billion from RM1.46 billion, with declines seen in both its technology and IT businesses. The energy business reported a slight topline gain of 2.7% on higher lifted volume, though at a lower Brent crude oil selling price.

On prospects, the group said it expects the ongoing semiconductor cyclical downturn to be short-term, with long-term growth prospects seen driven by new technologies in artificial intelligence, IOT (Internet of Things) and 5G technology.  As for its IT business, the group is actively tendering for digitalisation projects in Malaysia and abroad.

DNeX is also expecting the improving outlook in the oil and gas (O&G) sector to spur both upstream and downstream activities, which it believes bodes well for the OGPC Group, a service provider and distributor of technical products and equipment for the O&G sector it owns. “Leveraging on this, we are accelerating our efforts to strengthen and expand OGPC’s market presence,” it added.

DNeX’s shares closed half a sen higher at 44 sen on Monday (Aug 28), giving the group a market capitalisation of RM1.37 billion. The group’s share price has about halved from when it was trading at 85 sen 12 months ago.