KUALA LUMPUR (Oct 9): Dagang NeXchange Bhd (KL:DNEX) could see renewed investor interest after settling its long-running legal dispute over semiconductor subsidiary SilTerra Malaysia Sdn Bhd, removing a major uncertainty that has weighed on the stock, according to TA Securities.
DNeX was the most actively traded stock on Bursa Malaysia on Friday morning, with 71.99 million shares changing hands, nearly three times its 12-month average daily trading volume of 24.75 million shares. The stock fell 1.5 sen or 2.86% to 51 sen, valuing the group at RM1.77 billion.
The research house said the settlement allows DNeX and its Chinese investment partner to focus on expanding SilTerra's operations and tapping growing demand for semiconductor technology driven by artificial intelligence (AI) and data-centre investments.
"The prolonged legal dispute has weighed on investor sentiment and remained a key overhang on the stock," TA Securities said in a note on Friday.
It added that the settlement would provide greater clarity over SilTerra's shareholder and board matters, although it was not expected to materially affect DNeX's near-term earnings.
Following the development, TA Securities raised its target price for DNeX to 73 sen from 66 sen previously, while maintaining its "buy" recommendation.
DNeX announced on Thursday that it had reached a settlement with its Chinese partner, Tethystronics Technologies Co Ltd, to end all outstanding legal proceedings and arbitration involving SilTerra, without either party admitting liability or paying compensation, apart from certain legal-related costs.
The settlement paves the way for Tethystronics' wholly owned subsidiary, Mimastronics Technologies Co Ltd to invest RM100 million in DNeX Semiconductor Sdn Bhd through the subscription of redeemable convertible preference shares, subject to regulatory clearance.
The proceeds may be used to strengthen SilTerra's financial position and support expansion in manufacturing capacity and technology, particularly silicon photonics.
If the preference shares are fully converted, Mimastronics would hold approximately 33.33% of DNeX Semiconductor's enlarged ordinary share capital.
For now, SilTerra's direct ownership remains unchanged, with DNeX Semiconductor retaining its 60% stake and Mimastronics holding the remaining 40%.
The dispute dates back to 2022 over a proposed RM100 million investment and appointments to SilTerra's board. It initially wiped out about a third of DNeX's market value and continued into 2025, when an arbitrator ruled in favour of Tethystronics over the board appointments.
TA Securities said the settlement would allow SilTerra to focus on expanding its silicon photonics business to tap growing demand from AI and data centres.
"Their readiness to support further capital injections underscores their commitment to the business," it said.
SilTerra is also preparing to increase its manufacturing capacity as additional equipment comes onstream progressively in the second half of 2026.
TA Securities noted that management expects average selling prices in the semiconductor segment to rise by 5% to 10% during the period, with further growth anticipated in 2027.
"Emerging technology products are expected to contribute more than 60% of the semiconductor segment's revenue once the additional capacity comes onstream," it said.
TA Securities maintained its earnings forecasts for DNeX, projecting a net profit of RM80 million in FY2026, rising to RM135.3 million in FY2027.
The research house said the stock's valuation had yet to fully reflect SilTerra's AI-related growth potential, opportunities in the oil and gas sector and increasing recurring revenue from its digital business.
According to Bloomberg data, TA Securities has a "buy" call on DNeX with a target price of 73 sen, while BIMB Securities has a "hold" recommendation with a target price of 55 sen. The average target price of the two research houses stands at 64 sen.
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