KUALA LUMPUR (April 28): DXN Holdings Bhd has fixed an initial public offering (IPO) price of up to 76 sen per share, translating into a market capitalisation of RM3.79 billion upon its slated Main Market listing on May 19.
The dietary supplement direct seller’s IPO comprises a public issuance of 160 million new shares or 3.21% of its enlarged share base of 4.99 billion shares, and an offer for sale of up to 772.68 million shares (15.5%).
Of the public issuance, 100 million shares will be made available to the Malaysian public, while 60 million shares will be to eligible directors, employees and persons who have contributed to the success of the group.
Meanwhile, under the institutional offering, 623.13 million shares will be offered to Bumiputera investors as approved by the Ministry of Investment, Trade and Industry while up to 149.55 million shares will be offered to institutional and selected investors.
The IPO exercise is expected to raise RM121.6 million, of which RM80 million or 65.8% has been earmarked for repayment of bank borrowings, up to RM17.51 million (14.4%) for working capital, and RM24.09 million (19.8%) for listing expenses.
DXN is principally involved in the sale of health-oriented and wellness consumer products through its direct-selling network or sales branches. The company’s direct-selling network has reached 15 million members, DXN executive chairman and founder Datuk Lim Siow Jin said at the company’s prospectus launch on Friday (April 28).
According to its prospectus, 194.18 million shares (3.9% equity interest based on enlarged share base) under the offer for sale are from Lim’s vehicle LSJ Global Sdn Bhd, while another 578.5 million shares (11.6%) are from Gano Global Supplements Pte Ltd, which is owned by KV Asia Capital Master Fund I Pte Ltd and KV Asia Capital Fund I LP.
Prior to the IPO, LSJ Global owned 3.58 billion shares (74.3%) in DXN, while Gano Global owned 1.24 billion shares (25.7%).
Maybank Investment Bank Bhd (Maybank IB) is the IPO's principal adviser, and serves as joint global coordinator with CIMB Investment Bank, CLSA Ltd and CLSA Securities Malaysia Sdn Bhd. Further joined by RHB Investment Bank Bhd, the five serve as joint book runners.
Return to the Main Market after 12 years
It is worth noting that DXN had previously been listed on the Main Market of Bursa Malaysia in 2003, before the company was delisted in December 2011, following a takeover and privatisation by founder Lim.
DXN executive director and CEO Teoh Hang Ching explained to the press that the reason behind the privatisation was to restructure the company by focusing on its core business of direct-selling and disposing of its non-core business including tourism, as well as land and property development.
“Over the years, we have achieved a lot of growth from the restructuring. Sales have increased by 345% at a CAGR (compound annual growth rate) of 14.5%, and we have also set up more manufacturing plants,” he added.
Teoh said the rationale behind the relisting exercise is to reinforce DXN's reputation in the market and elevate the company to compete with key direct-selling market players.
For the financial year ended Feb 28, 2022 (FY2022), DXN posted a net profit of RM245.44 million, as compared to RM200.88 million in FY2021 and RM255.25 million in FY2020. Revenue stood at RM1.24 billion in FY2022, higher than RM1.05 billion in FY2021 and RM1.1 billion and FY2020.
As at end-October 2022, the group had total borrowings of RM233.62 million, while its cash and cash equivalents stood at RM407.02 million.
IPO shares priced at 15.6 times PER
The 76 sen issue price is valued at a historical price-to-earnings ratio (PER) of 15.6 times, according to Maybank IB head of equity capital markets Raymond Chooi.
Based on an independent market research report by Frost & Sullivan GIC Malaysia Sdn Bhd, Teoh said DXN’s key direct-selling market competitors are Amway Corp, Herbalife Nutrition Ltd, Nu Skin Enterprises Inc, Oriflame Holding AG, and USANA Health Sciences Inc.
Similar direct-selling players listed on the local bourse are Amway (M) Holdings Bhd, Beshom Holdings Bhd, Zhulian Corp Bhd and Citra Nusa Holdings Bhd. Citra Nusa was loss-making in its latest financial year, while Amway is valued at 11.3 times, Zhulian at 22.3 times, and Beshom at 12.3 times.
Teoh highlighted that DXN’s vertically integrated supply chain — where research, cultivation, and manufacturing are being done in-house — insulates the company from external supply chain shocks.
“Of course, there are inflationary pressures, but it is very minimal in the sense that it can hardly affect our gross profit margin by less than 1%, and we are able to maintain an over-80% gross profit margin.
“Even for net profit margin there will be no significant impact, the reason being we have vertically integrated production facilities and we cultivate most of our ingredients, so we are able to cater and overcome the supply chain,” he said.