PETALING JAYA: Cost pressures from raw materials may persist for DXN Holdings Bhd
in the near-term as supply shortages and increased global demand will continue to drive coffee average selling prices (ASP) upwards.
The group’s key earnings driver lies with its growth prospects in the Latin American region, particularly Peru and Bolivia, alongside its market penetration into new markets such as Africa, said Maybank Investment Bank (Maybank IB) Research in a report.
The research house said DXN’s third quarter of financial year 2025 (3Q25) results has met its expectations, while earnings are expected to be stable in subsequent quarters as the group's membership count grows in tandem with its presence in Latin America and other newer markets.
Maybank IB Research had made no changes to its earnings estimates on DXN.
The stock's target price (TP) is lowered to 72 sen based on an updated 2025 domestic peer average of 10 times versus 11 times previously.
The research house has maintained a "buy" call on DXN with an attractive dividend yield of above 7%.
Meanwhile, RHB Research in a note to clients said it maintained a “buy” call on the stock with a TP of 88 sen a share.
The risks to its call include major delays in expansion plans and unfavourable regulatory changes.
The brokerage firm believes that DXN's strategies to deepen penetration in existing markets and new market expansion should continue to foster growth, supplemented by new product launches.
"Valuation is highly attractive considering the effective business model, Brazil expansion as a medium-term growth driver and sturdy balance sheet," added RHB Research.
The 9M25 net cash stands at RM562mil or 11.2 sen a share to facilitate a generous dividend payout.
The brokerage firm also noted the recent capacity expansion should help to capture the rising demand and roll out new product categories to broaden the addressable markets.
In addition, the consequent efficiency gain, together with annual price adjustments will sustain the high gross profit margin of about 80% notwithstanding the rising input and overhead costs.
RHB Research said it looks forward to the result of the group’s entry into Brazil, leveraging on its established existing network in the Latin American region.
It also expects significant earnings contribution from this venture in three to four years time.
Maybank IB Research, meanwhile, said DXN’s third quarter 3Q25 revenue grew by 8% year-on-year (y-o-y) on the back of higher sales contribution from Latin America, up 7% y-o-y and the Middle East and Africa regions, which rose 47% y-o-y .
The Latin America and the Middle East and Africa regions accounted for 58% and 11% of DXN’s 3Q25 gross revenue respectively, said the brokerage firm.
