KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) expects bright growth prospects for Dagang Nexchange (DNeX) underpinned by rising Silterra Malaysia Sdn Bhd's net average selling price (ASP) per wafer and elevated crude oil prices.

HLIB is also upbeat about DNeX's growth prospects in the coming years following its new Avalon greenfield up and coming in July 2024 which would potentially quadruple subsidiary Ping Petroleum's current output.

DNeX's recent memorandum of understanding with Foxconn to develop a new 12-inch wafer fab to support its EV ventures will also contribute to the group.

"We highlight that at current levels, DNeX is trading at a bargain forward valuation multiples of only 11 times and nine times for financial year 2023 (FY23)- FY24 respectively in its entirety – based on our conservative earnings forecast.

"While we note that with guidance and expectations of further rate hikes from the US Federal Reserve in the second half of 2022, we believe that the tech sector may bear the brunt of trading volatilities in coming months and DNeX will not be exempted from this broad-base selloff.

"While timing a perfect entry point may be difficult to do, we believe that DNeX is currently trading at unwarranted levels given its luminous growth prospects," it said.

HLIB maintained its "Buy" call on DNeX with an unchanged target price of RM1.69.

"Currently at about 11times FY23 earnings in its entirety, we believe that DNeX is a compelling case given its strong foothold in both the front-end semiconductor and upstream energy spaces," it said.