Summary

• In-line with expectations. For 4Q24, REXIT recorded a core PATMI of RM2.9m (- 14.2% QoQ, -19.7% YoY), bringing the FY24 core PATMI to RM13.2m (+19.9% YoY). The results were in-line with our and consensus earnings forecasts, at 100.8% and 101.6%, respectively.

• QoQ. Core PATMI dropped 14.2% QoQ from RM3.4m to RM2.9m, reflecting lower revenue due to reduced software customization service and higher administrative expenses. Although the core PATMI margin slightly declined to 39.8% for the quarter, the overall FY24 core PATMI margin remained stable at 41.2%, similar to FY23’s margin.

• YTD. However, for FY24, core net profit rose by 19.9% YoY, driven by the increased in hardware, systems software sales and software sales and services. In line with the rising revenue, the PAT also grew by 19.9% YoY, reaching RM13.2m.

• Outlook. We believe REXIT’s business operations remain sturdy, as demonstrated by the growth in both top- and bottom-line numbers, along with stable profit margins, which stood at 41.2% for the past two years. Earlier this year, REXIT appointed Mr Wong Tack Heng as COO, a seasoned professional with extensive experience in leading technology initiatives across various industries. Additionally, Datuk Seow Gim Shen, was appointed CEO,bringing strong leadership experience from both local and Nasdaq-listed companies.

• Net cash position. As of FY24, REXIT’s net cash position stood at RM33.2m (21.0% of market cap), translating to a net cash per share of 19.2 sen.This strong cash position will support future capex needs and allow for shareholder dividends.

Valuation & Recommendation

• Reallocating resources and cease coverage. Despite the stable outlook on REXIT, we terminate our coverage on REXIT due to a reallocation of resource. Our last rating on the stock was a BUY with a target price of RM1.16, pegged to a P/E of 14.0x applied to FY25f EPS of 8.3 sen. We also assume a payout ratio of 70.0% of its distributable income from FY25f, translating to dividend per share of 5.8 sen and a dividend yield of 6.4%.

Source: Mplus Research - 28 Aug 2024