KUALA LUMPUR (July 26): Maybank Investment Bank (Maybank IB) has initiated coverage on health and wellness direct selling group DXN Holdings Bhd at 72 sen with a target price of 90 sen. It also has a "buy" rating on the group.

In a note on Wednesday (July 26), the research house estimated a three-year (FY2023-FY2026) core net profit compound annual growth rate (CAGR) of 12%, largely driven by a three-year revenue CAGR of 16%, stable operating margins of 29% from FY2024-FY2026, and an effective tax rate of 37% per annum.

The research house said topline growth will mainly be driven by higher active member growth and average revenue/active members in the Latin American countries.

The company has 14.9 million registered members and 3.6 million active members spanning across more than 180 countries as at March 31, 2023.

For the financial year ended Feb 28, 2023, DXN posted net profit RM275.4 million on the back of RM1.6 billion revenue.

“We peg DXN’s earnings to 11 times CY2024 [estimated] PER (price-earnings ratio) to derive our 90 sen target price.

“Our target PER multiple implies a 10% premium to CY2024 [estimated] domestic peer average of 10 times (market weighted) given DXN’s steady three-year forward net profit CAGR of 12% and superior ROAEs (returns on average equity) of 27%-31% per annum compared to  its peer range of 21%-22%.

“DXN’s PEG of 0.7 times, at current share price, also compares favourably relative to its domestic peer’s average of 1.1 times,” it said.