KUALA LUMPUR (Nov 29): TA Securities believes that Rexit Bhd's revenues for the financial year ending June 30, 2024 (FY2024) to FY2026 will remain resilient, with stable single-digit percentage growth, thanks to higher usage of its proprietary e-Cover system by both new and existing customers.

In a note on Wednesday, the research house said in addition to growing adoption of e-Cover — which is an online insurance transaction system that facilitates insurance companies and their intermediaries to deliver products and services electronically — it also sees further growth in Rexit's revenue from ancillary software customisation services.

"In all, we maintain our target price for Rexit at 93 sen, based on a target price-earnings ratio of 14 times calendar year 2024 earnings per share, closely in line with the stock's five-year mean.

"However, given the stock's narrowed risk reward potential, following recent share price appreciation, we downgrade our recommendation on Rexit from 'buy' to 'hold'," it said.

TA Securities added that it continues to like the integrated financial services solutions provider for its resilient business model, exposure to the defensive insurance sector, as well as robust return on equity and rich double-digit margin.

On Rexit's recently announced results for the first quarter ended Sept 30, 2023 (1QFY2024), the research house said its net profit of RM2.82 million — up 16% year-on-year (y-o-y) but down 23.2% quarter-on-quarter (q-o-q) — came in within its full-year estimate at 25%.  

The research house said while Rexit's q-o-q decline in net profit was due to a 3.5% drop in revenue from software customisation services, its revenue growth was resilient on a y-o-y basis, driven by higher software sales and services, as well as the outsourcing services agreement for the mySalam national health protection scheme. 

TA Securities also noted that the group declared an interim dividend of five sen per share for 1QFY2024, which was higher than its expectations of 4.5 sen and the previous year’s payout of four sen.

The dividend yield for the stock is 5.6%, based on its Tuesday closing price of 90 sen.  

The group in a bourse filing said that they estimate the outlook for the company to remain cautious.  

At the time of writing on Wednesday, shares in Rexit had increased four sen or 4.44% to reach their all-time high of 94 sen, with a market capitalisation of RM170.40 million. 

The counter was among the top gainers listed on Bursa Malaysia in early trade on Wednesday, with 20,000 shares changing hands.