PETALING JAYA: DXN Holdings Bhd
’s growth prospects appear positive, driven by the expected growth of its membership network, new product launches and expansion into new markets.
At the close of its financial year ended Feb 29, 2024 (FY24), the health food supplement company had 5.4 million active members across about 180 countries.
According to CGS International (CGSI) Research, DXN’s revenue could post a three-year compounded annual growth rate (CAGR) of 12% between FY24 and FY27.
“We are still positive on DXN’s revenue growth trajectory on the back of expansion in membership numbers, new product launches and new market expansion,” it said in a report.
Overall, it projected a three-year CAGR of 13% for DXN’s earnings per share (EPS) between FY24 and FY27, driven by strong revenue growth.
Nevertheless, CGSI Research said it lowered its estimates for DXN’s earnings before interest and tax margin to around 27% for FY25-FY27, compared with the company’s historical 29% to 30%, given the higher raw material costs and increase in sales mix of fortified food and beverages.
It resumed its coverage of DXN with an “add” call, citing buoyant earnings outlook.
The research house tagged its target price for the counter at 85 sen, based on an undemanding valuation of 10.2 times the estimated price-earnings for 2024, which represented a 25% discount to its peers.
“We think (the valuation) is justified, given its higher frontier market exposure that generally carry a higher country risk premium, while offering attractive FY25-FY27 dividend yields of 7% to 10%.”
It said one of the main drivers of DXN’s revenue growth was its vast network of 5.4 million active members in about 180 countries as at end-FY24, which translated to a CAGR of 14% between FY20 and FY24.
“We expect DXN to post a three-year active member CAGR of 8.9% between FY24 and FY27, driven by both organic growth from its existing markets as well as expansion into new high-growth markets, starting with Brazil in March 2024, followed by Argentina, Algeria and Ghana over the next few years,” it added.
CGSI Research said new product launches would also boost DXN’s revenue.
“We believe another growth driver of DXN’s revenue will come from its fortified food and beverage segment, which experienced a three-year CAGR of 21.8% between FY20 and FY24.
“This comes with more product launches in the pipeline that include a greater number of product variants for its existing product range, as well as new offerings such as ready-to-eat products,” it said.
