KUALA LUMPUR (Oct 26): RHB Investment Bank Research (RHB IB) has maintained its "buy" call on health and wellness direct selling company DXN Holdings Bhd at 63 sen with a target price (TP) of 93 sen, saying its recent positive performance outlook indicates a potential upside of 48% and a forecasted yield of approximately 5% for the financial year ended 2024 (FY2024).  

“We make no changes to our earnings forecasts and discounted cash flow-derived TP of 93 sen (inclusive of a 2% ESG discount). Our TP implies 14x P/E FY24F, which is below the sector average, to reflect the highly regulated direct selling industry DXN is in,” the research house said.  

In a note on Thursday, the research house said it firmly believes in DXN's performance outlook, following the company's relisting on Bursa Malaysia's Main Market, amid its robust growth prospects, resilience against various global headwinds and effective business model.  

“Its [DXN] current valuation is attractive, as its consistent earnings delivery and successful new market penetrations should drive a rerating. In addition, its sturdy balance sheet should continue to support capex requirements and generous dividend payouts,” the research house said.  

Notably, RHB IB projected a stronger earnings performance for DXN in the third quarter of financial year 2024 (3QFY2024F) due to favourable seasonal factors, including a higher number of working days and absence of festive season, as well as price increases in Peru and Bolivia.  

According to RHB IB, DXN is expected to cope with potential hurdles, including changes in the global economic structure with exorbitant inflation rates, relatively easily, as it is well-equipped to handle these due to its expanding distributor member base, strengthened presence in key markets and penetration into new high-potential markets.

Besides, the completion of the latest phase of upstream expansion will enable DXN to meet increasing demand and introduce more innovative products to boost sales.  

“We also expect DXN to be less affected by any hike in costs, thanks to the internal integrated production facilities which account for over 90% of the group’s revenue and enable it to command a high GPM of approximately 80%,” it added.  

Revenue for the first half of 2024 (1HFY2024) for DXN increased 17% year-on-year to RM882 million, driven by continuous growth in key markets such as Latin America, India and the Middle East. 

On the other hand, revenue for the second quarter of financial year 2024 (2QFY2024) grew 8% quarter-on-quarter to RM485 million, driven by the aforementioned growth factors. 

At the time of writing, DXN shares were unchanged at RM0.63 on Thursday, valuing the company at RM3.12 billion.