KUALA LUMPUR (May 19): Main Market returnee DXN Holdings Bhd has become the first listed company to close lower than its initial public offering (IPO) price on its maiden trading day this year, as it settled at 66.5 sen compared with the IPO price of 70 sen.

The counter had also opened 1.4% lower than its IPO price at 69 sen on Friday (May 19) with 12.71 million shares exchanging hands. Its intra-day share price was seen in the range between 64 sen and 70.5 sen.

DXN was the most-active stock on Bursa Malaysia on Friday with 216.41 million shares changing hands.

The multilevel marketing company’s executive chairman and founder Datuk Lim Siow Jin said many of its overseas members have expressed interest in buying DXN shares but the sentiment will only be reflected in one to two weeks from now.
 

“For DXN, the strength of [its] Malaysian members is only about 7%, over 90% are overseas members and for them to buy the shares in Malaysia is not that straightforward,” he said in a press conference on Friday.

Based on DXN’s fact sheet, the company, which is involved in sales of health-oriented and wellness consumer products, has over 14.9 million registered members and over 3.6 million active members in more than 180 countries.

DXN’s largest revenue contributor is Peru, where it contributed 25.8% to the group’s revenue for the financial period ended Oct 31, 2022, followed by Bolivia with 13.5%. Mexico comes third with 11.7% contribution, while India contributed 10.2% to the group’s revenue.

Moving forward, DXN plans to expand into five markets, on top of its current 48, namely Argentina and Brazil in the Latin America region, as well as Algeria, Niger and Ghana in Africa.

DXN’s executive director and CEO Teoh Hang Ching said the Latin America region is expected to be operational at the end of 2023, while the Africa region is expected to be operational at the end of 2024.

Lim said DXN is prioritising its development in these two regions for the next three to five years, and then the company plans to shift its focus to China.

Lim elaborated that its strategy for the China market would be through social media and web marketing given China’s large population and familiarity with the home delivery system.

DXN has already set up two production plants in China which serve as a supply chain.

“China is mainly manufacturing spirulina in the desert area of Ningxia. China is aggressive in promoting agriculture and the cost of production is much cheaper in China (than in Malaysia),” Lim said.

“The government also provides a lot of incentives and the land is rented to us at nominal value,” Teoh further said.

The company had aimed to raise RM112 million from the listing exercise. With reference price at 70 sen per share and an enlarged issued share capital of 4.99 billion shares, DXN's expected market capitalisation upon listing was RM3.5 billion.

The company said it has earmarked a large portion, amounting to RM80 million (71.4%), for repayment of bank borrowings. It has also allocated RM7.9 million (7.1%) for working capital and another RM24.1 million (21.5%) for listing expenses.

Regarding the repayment of bank borrowings, Teoh said: “About RM50 million is for longer term and the balance goes to the current term within one year, that is the payment.”

He said the company has RM457 million cash in hand, while its short-term and long-term borrowings amounted to RM233 million.

“We have quite a low gearing, actually our cash in hand is more than the loan. We are a net cash company,” Lim said.

Subsequently, Lim explained its listing expenses were high because the listing exercise took more than two years.

Teoh said the high cost of audits also contributed to the listing expenses.

When questioned on its outlook on the performance of the ringgit and its effect on DXN’s performance, the management said there are risks pertaining to currency fluctuations and DXN has been mitigating it.

“DXN uses only local workers in Malaysia in our factory, that is why we are relatively signed off by the effect of the ringgit. In overseas offices, we use their local currencies as well.

“The only thing is that there are some risks in international trading that apply to all companies. But we, from past experiences, have weathered through it well,” Lim said.

Lim highlighted DXN’s strength as a vertically integrated supply chain with in-house research, cultivation and manufacturing functions which helps the company’s ability to control its product quality and costs.

Previously listed on the Main Market in 2003, DXN was delisted in December 2011 after being privatised by Lim, who is also the founder of the company.

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.