A)Income Statement

From the Income Statement, the contribution of Profit before income Tax for associate is RM85.3million.

B)Balance Sheet

1)The Subscription in subscription shares in Ping  had been completed by DNex Petroleum Sdn Bhd ("DNex Petroleum")

 on 30 June 2016.

2)DNex Petroleum currently hold 30% equity interest in Ping.

3)Sin Chew Jit Poh Article 

Means only RM42.6million (out of RM127mil invested in associates) is used to invest in Ping Petroleum.

C)Quarterly Performance Review

The HUGE jumped in profit before tax was mainly contributed by Share of result of an assoicate company of

RM85.3million in current year quarter

D)Prospects for 2016

As higlighted in Prospects for 2016

1)The completion of Ping Subscription had resulted a SIGNIFICANT improvement in Group net assets value; 

2)OGPC Group acquisition , which was completed on 3 August 2016, another associate that going to

    contribute in Q3 16.

E)DNex article published by Sin Chew Jit Poh

Highlight of  above article (Apologized if there is  translation error)

1)In IT sector, DNex is the BIGGEST Electronis Trading System in Malaysia

a)Posses 13 thousand Business Clients

b)National Single Window (NSW) Sole Proprietor, Currently is main revenue contributor

2)Successfully acquired 30% Ping petroleum equity

3)Successfully acquired (RM170 mil, through Offer Right) OGPC Group whcih supply O&G equipments.

4)Cost of Production is US34 per barrel, If Q2 16 make RM85.3mil with Crude Oil price around US45.

    What about Q3 16, is DNex going to have Huge profit again with Crude oil price around US45!

Please read also the link below:

http://www.sinchew.com.my/node/446564

F)DNex article published by TheEdge Financial Daily (updated on 31/10)

Highlights

1)Investment in Ping was done at time when Crude oil prices were soft and volatile-acquired it at less than US2

  per barrel, for the reserve it has.

2)DNex O&G div has been awarded an umbrella contract in April 2016 for the provision of directional drilling services to

    Petronas Carigali Sdn Bhd.

3)DNex had secured a vehicle entry permit point(VEP) and Road Charge (RC) IT infrastructure job in Johor fr the MoT

   earlier 2016 for rm45mil. This coming quarter, will bill another 40%, with the balance 20% in the subsequent quarter.

4)Still waiting for the operation and maintenance contract of the VEP and RC system.

5)The plan was for the VEP and RC system to be extended in stages from the Johor border to other road entry point,

     Brunei-Malayisa, Indonesia-Malaysia, Thailand-Malaysia, that is another 12 other entry points.

6)The group's Electronics Trading facilitation system, dubbed the National Single Window (NSW), is a system allows 

    exporters to conduct almost all necessary cross custom procedure on it single internet portal. The Dnex is the only

    system provider of the NSW in the country. 

7)NSW will soon be phased out, despite the two years extention til sept 2018. The system to be replace by uCustoms.

     DNex has been appointed as one of the two service providers of uCustoms.

8)FY17, group revenue will double to RM200mil (Q1+Q2 revenue is only RM74 mil, another average of RM63 mil per

   quarter to go) since there will be first full year consoldiation revenue recognised from OGPC sdn bhd and PGPC O&G

   sdn bhd.

9)OGPC has been reporting some RM100mil revenue and RM20mil net profit over the past few years.

10)Group MD hopes to grow all the business steadily over time, hope revenue would hit RM400mil to RM500mil in

      5 years.

Conclusion

DNex invests in fair value (assumption made since invested during low crude oil price and make huge profit at crude oil

price US45)  in Ping Petroleum. So as us, as a value investor to invest in DNex with such as low PE, reasonable P/BV

and Low EV/EBIT.

Valuation at price 0.29 

PE=3.6 <10    Good

P/BV= 1.91 <1.5  max 2  ok

EV/EBIT=2.2<8 Good (include associate RM85mil, otherwise EV/EBIT=9.8)

F)Technical Chart

Based on Chart, expect 2 to 3 days to challenge price 0.31 again

Disclaimer

This is not a buy or sell call, please invest with your own risk.