Summary

• Within expectation. In 2Q24, REXIT recorded a core PATMI of RM3.7m, increased 29.7% QoQ and 33.7% YoY, respectively, bringing the 1HFY24 core PATMI to RM6.5m. The core PATMI was adjusted for the one-off hardware, system software sales, which is c.RM0.4m in the bottomline. The core 1H24 earnings came in within our expectation, accounting to 56.6% of the earnings forecast of RM11.4m as we believe the earnings may normalise in 2H24.

• QoQ/YoY. Core net profit increased 29.7% and 33.7% from RM2.8m and RM2.7, respectively to RM3.7, attributed to higher distribution income from long term investment in quoted funds. YoY, we noticed administrative expenses were lower at RM1.4m as compared to 2QFY23 at RM1.6m.

• YTD. For the 1HFY24, core net profit rose 25.4% YoY to RM6.5m, in tandem with the increase in revenue by 21.9%. The higher distribution income from long term investment in quoted funds and lower admin expenses were the main contributor to the higher core net profit on the YTD basis.

• Outlook. We believe the administrative expenses will stabilize around this level. Meanwhile, the c.RM1.8m revenue for the hardware, systems software sales and software sales and services may not recur in the next few quarters. To recap, the emergence of new shareholder via DBT on 17-Jan-2024 has triggered an unconditional mandatory take-over, where the Joint Offerors will offer RM0.85 per share to acquire the remaining REXIT shares. Also, the Joint Offerors intend to maintain the listing status of REXIT.

• Net cash position. As at 1HFY24, REXIT’s net cash position stood at RM27.2m (18.0% of the market cap), translating to a net cash per share of 15.7 sen. Its net cash position will be comfortable to support its capex required for any future expansion.

Valuation & Recommendation

• Maintained forecast. Given the core PATMI came in within expectations, we kept the earnings unchanged for FY24f-25f.

• Maintained SELL. We maintained SELL despite the share price has dipped below RM0.90 after we recommended a SELL on REXIT at RM1.05 following the announcement of the Mandatory take-over offer in Jan-24. We opine that the current share price is still trading at a premium towards the offer price of RM0.85, and it represents an opportunity for the shareholders to take profit in light of potential uncertainties surrounding REXIT’s long term outlook after the departure of the previous shareholders. In terms of P/B ratio, the offer price of RM0.85 indicates a P/B of 3.0x.

• Fair value or TP stood at RM0.945. Our fair value or TP for REXIT stood at RM0.945 (upside of 5.6% and 11.1% from last price of RM0.895 and offer price of RM0.85 respectively). The fair value is derived by ascribing a 14.0x P/E pegged to FY24f EPS of 6.9 sen. Also, we assumed a payout ratio of 60.0% of its distributable income from FY24-25f, translating to dividend per share of 4.5-4.7 sen.

Source: Mplus Research - 23 Feb 2024