KUALA LUMPUR (Oct 31): The current attractive valuation of the global health and wellness direct selling group company DXN Holdings Bhd, with its broad portfolio of differentiated and fast-moving health and wellness products, and nimble asset-light direct selling strategy has concurrently made the company enjoying more oligopoly power and impede competitors from entering the market, said RHB Investment Bank (RHB IB).  

In the note on Tuesday, the research house has initiated coverage with a "buy" rating on DXN at 67 sen and a target price (TP) of 93 sen, which represents a 40% upside and an estimated financial year of 2024 (FY24F) yield of around 5%. The target price implies a 14x P/E for FY24F, which is below the sector average. 

RHB IB said that DXN’s unique business composition and impressive profit margins and return on equity (ROE) reflect its solid fundamentals and well-structured business model.  

“This entails an extensive portfolio of popular health- and wellness-oriented consumer products, complemented by an integrated upstream set-up and expansive global distribution network,” said RHB IB.  

According to RHB IB, DXN’s sales remained robust throughout the years including during the economic downturn of pandemic Covid-19 which saw a slight decrease of 5% in the financial year of 2021 (FY21) before bouncing back strongly with an increase of 18% in FY2022 and 29% in FY23.  

RHB IB said the company has consistently maintained its core net margins close to 20% over the past three years and was able to convert a strong profitability into healthy cash flows.  

“Such financial credentials and track record bode well for the group — especially when entering new markets — by instilling confidence in its new members” it added.  

The research house projected the revenue for DXN to grow at a rate of 16% for the financial year of 2024 (FY2024), 13% for FY2025, and 12% for FY2025. This corresponds to a three-year compound annual growth rate (CAGR) of 14%, increasing from RM1.6 billion in FY2023 to RM2.4 billion in FY2026.  

In addition, RHB said DXN is currently planning to expand its market presence into countries such as Argentina, Brazil, Niger, Algeria, and Ghana. The company has also expanded its production network by adding more cultivation and manufacturing facilities to accommodate the expected increase in demand.  

Additionally, DXN has invested in a wellness and retreat centre called DXN Cyberville. This investment aims to better engage with its members and optimise the costs of their annual incentive trips. Alongside these strategies, DXN will continue to focus on product innovation and technology enhancements. 

At the time of writing on Tuesday, DXN shares were down half a sen or 0.75% to 66 sen, valuing the company at RM3.36 billion.