KUALA LUMPUR (July 31): RHB Investment Bank Research (RHB IB) has maintained its “buy” rating on health and wellness direct selling group DXN Holdings Bhd at 75 sen with an unchanged target price (TP) of 93 sen, and said DXN’s 1QFY2024 results met expectations with a robust topline growth, on the back of positive traction in key markets more than offsetting the effects of a higher effective tax rate (ETR). DXN’s current valuation is attractive, considering its solid growth prospects, underpinned by new market expansion and insulation from the rising costs.

In a note on Monday (July 31), the research house said the superior profit margins and ROE (return on equity) are a strong testament to its entrenched fundamentals and well-crafted business model.

DXN was relisted on Bursa Malaysia’s main market on May 19, 2023.

RHB IB said DXN’s core net profit of RM87 million (+6% year-on-year) met 26% of house forecast.

For the first quarter ended May 31, 2023, DXN’s net profit rose marginally to RM77.60 million from RM77.2 million, on the back of a 17% increase in revenue to RM423.98 million versus RM360.39 million.

The company declared a dividend of 0.80 sen per share.

The research house said that notwithstanding the challenges in a slowing global economy growth and heightened inflationary pressures, DXN is in a strong position to deliver sustainable growth.

“This will be underpinned by the growth in distributor member base, as the group continues to strengthen its presence in key existing markets and at the same time, make inroads into high potential new markets.

“In addition, the completion of the latest phase of upstream expansion bodes well for the group to capture the ensuing rising demand and introduce more innovative products to attract higher sales.

“On top of that, we also see DXN (as being) less affected by any hike in costs, thanks to its internal integrated production facilities, which account for more than 90% of the group’s revenue and command higher gross profit margin of more than 80%,” RHB IB said.

At the time of writing on Monday, DXN added 0.67% or 0.5 sen to 75 sen, with 3.24 million shares traded. The stock has gained some 8.6% from its initial public offering (IPO) price of 70 sen.