KUALA LUMPUR (Dec 7): CGS-CIMB Securities has maintained its "add" rating and target price of 85 sen for wellness company DXN Holdings Bhd, which produces health products and dietary supplements and others.
In a note on Wednesday, the research house highlighted that DXN through its China operations, known as DXN Ningxia, was gearing up to enter China’s growing fast-moving consumer goods markets, while laying the groundwork for a local direct-selling licence.
According to CGS-CIMB, DXN Ningxia is expected to launch its high-margin ready-to-drink health product series in China and other export markets in 2024.
The research house highlighted that DXN had a strong competitive edge in terms of scale economies and margins, driven by its biotechnology innovations and customised equipment.
“Its customised equipment for mass production of Mycelium liquid spawn (key to its cultivation) and biotechnology innovations to advance its Mycelium variant could help to boost yields and operational efficiency,” CGS-CIMB reported.
The company is forecast to have a three-year earnings per share compound annual growth rate of 15% for the financial year ended Feb 28, 2023 (FY2023) to FY2026, while offering attractive dividend yields of 5% to 7%.
CGS-CIMB also believes that DXN’s current valuation is undemanding at 8.5 times forecast calendar year 2024 price-earnings ratio, a 38% discount to its overall peers’ 10-year average mean.
At the time of writing on Thursday, shares in DXN had slipped half a sen or 0.78% to 64 sen each. The company's market capitalisation stood at RM3.22 billion.