KUALA LUMPUR: RHB Investment Bank research (RHB Research) expects DXN Holdings Bhd to be in a solid position to deliver stronger earnings in the third quarter of financial year 2024 amid the challenges in the global economy and heightened inflationary pressures.
Earnings should be driven by the growth in its distributor member base, as the group continues to strengthen its presence in key existing markets and, at the same time, make inroads into high-potential new markets.
DXN cultivates, manufactures and markets health food supplements and well known for its ganoderma business. It has over 14.9 million registered distributors worldwide.
According to RHB Research the completion of the latest phase of upstream expansion bodes well for it to capture the ensuing rising demand and introduce more innovative products to boost sales further.
In addition, its sturdy balance sheet should continue to support capital expenditure requirements and generous dividend payouts.
"We continue to like the company for its robust growth prospects, undeterred by various global headwinds and backed by an effective business model."Its current valuation is attractive, as its consistent earnings delivery and successful new market penetrations should drive a rerating," it said in a note today.
RHB Research has a buy call on DXN's stock, with a target price of 93 sen for its shares. Its shares was trading 2.38 per cent higher at 64.5 sen as at 11.21am.
RHB Research also expects DXN to be less affected by any hike in costs, thanks to the internal integrated production facilities which account for more than 90 per cent of the group's revenue.
"Downside risks to our recommendation include major delays in expansion plans and unfavourable regulatory changes," said RHB Research.
DXN Holdings' 1HFY24 (Feb) results met expectations, underpinned by relentless growth in key operating markets. Core net profit of RM169 million accounted for 51 per cent of RHB Research's full-year estimate.
It also now has in place a policy to pay out at least 50 per cent of its net profit as dividends.