PETALING JAYA: RHB Research has maintained its “buy” call on direct-sales group DXN Holdings Bhd
as its key existing markets have contributed solid growth and are expected to continue doing so.
DXN’s core activities include the cultivation, manufacturing and marketing of health-oriented and wellness products through a direct-selling model.
The research house said the positive momentum is likely to be sustained, considering DXN’s strategy to continue recruiting more members while enhancing productivity.
The research house said the strategies will revolve around member engagements, complemented by launches of new products.
“Its current valuation is attractive, in view of its consistent earnings track record post-listing, expansion in Brazil as a medium-term growth driver and sturdy balance sheet to facilitate generous dividend payouts,” RHB Research said.
The group’s expansion into Mexico, India, Peru and Bolivia have been the primary drivers even as it remained poised to enter Argentina and Chile.
According to RHB Research, DXN’s first quarter results for its financial year 2025 (1Q25) met expectations, recording RM82mil in net profit which was 22% of full-year forecasts.
The research house added it expected better quarterly earnings for DXN from deeper market penetration.
“As such, we make no changes to our earnings forecasts and discounted cashflow-driven target price of RM0.93, which implies a 12 times price-earnings ratio for FY25.
The valuation is below the consumer sector average, to take into account the highly regulated direct-selling industry DXN is in,” the research house said.
As for its year-on-year results, DXN’s 1Q25 revenue increased 12% to RM475mil, backed by robust growth in major existing markets including Peru, Bolivia and Mexico, on the back of effective marketing strategies and new product launches.
However, core net profit for the quarter under review fell 8% to RM82mil due to a swing in foreign-exchange adjustments which amounted to RM12mil and higher charitable contributions of RM4mil.
Quarter-on-quarter revenue and profit increased 1%.
The research house said the recent capacity expansion should help DXN to capture rising demand and roll out new product categories to broaden its addressable markets.
“On top of that, we look forward to the results of its entry into the Brazil market, as it leverages on its established network in Latin America. We expect to see significant earnings contributions from this venture in three to four years,” it said.
RHB Research said some of the risks for DXN include major delays in expansion plans and unfavourable regulatory changes.
