KUALA LUMPUR (May 18): Mercury Securities Sdn Bhd has set a target price (TP) of 95 sen for Main-Market bound DXN Holdings Bhd — representing a potential return of 35.7% over its initial public offering (IPO) price of 70 sen — with a “subscribe” recommendation.
“We like the stock for its global market presence and established integrated supply chain equipped for an attractive expansion plan, well-positioned to leverage on the growth of the global market size of health and wellness product which is estimated by Frost & Sullivan to grow at [a] CAGR [compound annual growth rate] of 10.1% from 2022 to 2026,” it said in a note on Wednesday (May 17).
According to the research house, the TP of 95 sen is based on the group’s estimated earnings per share of 6.3 sen for the financial year ending Feb 28, 2024 (FY2024) and price-earnings (PE) of 15 times, which is in line with the consumer products and services sector’s PE in FY2024.
DXN Holdings is primarily involved in the sale of health-oriented and wellness consumer products consisting of fortified food and beverages, health and dietary supplements, personal care and cosmetics, and other products.
Previously listed in 2003, it was subsequently delisted in December 2011, following a takeover and privatisation by its executice chairman and founder Datuk Lim Siow Jin. The reason behind the privatisation was to restructure the group 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.
Since its privatisation, the group achieved an 11-year CAGR of 14.5% for its revenue, said Mercury Securities.
In addition, DXN has achieved a CAGR of 6.1% in revenue from FY2020 to FY2022, despite the challenges posed by the Covid-19 pandemic, according to the research house.
This is driven by its highly scalable and sustainable business model and an extensive distribution network encompassing 14.9 million registered members with over 3.6 million active members as of March 31, 2023.
On the financial front, Mercury Securities is projecting DXN’s profit after tax to climb to RM328.4 million in FY2024, from RM289.3 million a year earlier, while revenue is seen increasing to RM1.77 billion, from RM1.6 billion in FY2023.
DXN, which saw its IPO oversubscribed by 3.2 times by the Malaysian public, ahead of its listing and return to the Main Market on May 19, is expected to raise RM121.6 million from its IPO.
Maybank Investment Bank Bhd 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.