DXN’s market comeback

Lim says DXN plans to set aside proceeds from its fresh IPO to further expand its presence globally.

WHILE the market awaits the re-listing of DXN Holdings Bhd, slated for the second quarter of this year, the maker of health and wellness products says top on the list of its priorities is to continue to pursue growth globally.

“We see ourselves more of a growth company as we have a strong presence across diversified markets with huge growth potential,” founder and executive chairman Datuk Lim Siow Jin tells StarBizWeek.

DXN was first listed on Bursa Malaysia back in 2003 but was delisted in 2011 after Lim made an offer to take the company private.

The group’s business started with cultivating Ganoderma or Lingzhi, which is also known as the “king of herbs” within health supplement circles.

Its operations which started in the 1990s now covers the entire spectrum of commercialisation including the cultivation, manufacturing and marketing of Ganoderma as well as other herb-related food supplements.

DXN also uses these herbs to make fortified beverages as well as skin care and cosmetic products.

According to Lim, DXN’s products are “unique and innovative”, with many of them having been developed in-house by the company’s own research and development team.

The main natural active ingredients in its products include Ganoderma, Spirulina, Lion’s Mane, Cordyceps and Noni, Lim says.

The way in which DXN sells its products is via the direct selling, also known as multi-level marketing or MLM route.

For this, the company has received its fair share of detractors who believe that MLM companies often attract fair-weathered sales agents, also known as members, who tend to make up the DNA of an MLM.

Furthermore, MLMs have sometimes been associated with unsavoury business practices as seen in several cases here and globally.

“We chose to adopt the direct-selling method as it is a cost-effective product distribution approach with minimal recurring operating expenses required,” Lim says matter-of-factly.

He says with this method, there are no physical storefronts except for service centres, which are being operated by its members at their own costs.

“This has enabled us to achieve organic growth globally in a sustainable manner given the low capital expenditure required and strong demand visibility.”

Lim adds that in order to ensure the company’s direct-selling model is sustainable, DXN has structured a “One World One Market” compensation plan that does not require an upfront membership fee nor annual fee.

“Bonus is paid solely on sales. Any recruitment without sales will not be entitled to the payment of bonus. It is geared towards incentivising sales to customers rather than inventory loading. This allows DXN to attract new members and expand its distribution network sustainably,” Lim says.

Currently, DXN has more than 12.7 million registered members globally and its active member base stands at 2.8 million.

The company sells its products in over 50 countries, kicking off its global reach with neighbouring Asean markets in the earlier years.

It has two research, five cultivation and nine manufacturing facilities located both here and abroad.

Under its upcoming initial public offering (IPO) exercise, DXN, backed by Singapore private equity firm KV Asia Capital, could reportedly raise over RM1bil, making it one of the biggest IPOs this year - if this materialises.

The book building process for the exercise has yet to begin with the company currently on roadshows to promote the company to potential investors.

Meanwhile, Lim says DXN plans to set aside proceeds from its fresh IPO to further expand its presence globally.

“Firstly, we aim to penetrate deeper into existing markets. Currently, we have 77 sales branches in 50 countries and our members are present in more than 180 countries. “We aim to expand our presence in these existing countries. This means growing our global network of members in countries where we are currently present in.”

To be sure, the company, which made a profit after tax and minority interest or Patami of RM191.6mil on revenue of RM1.05bil for its financial year ended Feb 28, 2021, has already invested about RM178mil in its existing production facilities and some RM263mil in new production facilities. This includes for the construction of a cultivation and manufacturing facility in Telangana, India, as we recognise the huge potential market for DXN’s products in South India, Lim says.

Likewise, the company has also increased its investments in China with more than RM83mil spent on the construction of cultivation and manufacturing facilities in Ningxia.

“We also aim to cover a wider range of markets by growing our member base or partnering with external distribution agencies which have the advantage of local market know-how and better networks with local stakeholders,” Lim says.More specifically, plans are in the pipeline to expand into five new markets, including countries in the Latin American and African regions.

“In 2023, we aim to focus on penetrating into Niger, Algeria and Ghana. Our facilities are strategically located across the globe to minimise supply chain disruptions.

“We control the upstream and downstream value chains. This allows us to produce products with consistent quality, and generate higher gross profit margins.”

Lim dismisses concerns about some of the company’s assets such as its facilities being located so far away from Malaysia, saying that fixed assets listing diligence has been carried out by its auditors.

“So far no issues have been raised,” he says.

Moving forward, he says DXN will continue to enhance its product offerings with new health and wellness products.

The company has a dividend policy which will see it paying out 30% to 50% of its Patami every financial year.