As announced on January 27, DXN Holdings Berhad (DXN, 5318) has delivered an impressive financial performance for the third quarter of fiscal year 2025 (Q3FY25), with revenue reaching RM486.1 million. This represents an 8.0% year-on-year (YoY) increase, though it saw a slight 0.5% decline quarter-on-quarter (QoQ). More importantly, the company achieved a historic milestone by recording RM92.8 million in net profit, marking an 18.4% YoY increase and an outstanding 40.6% QoQ growth.

During the corporate presentation held on February 7, management attributed its revenue growth primarily to strong performances in Latin America and the Middle East. The company’s top 10 contributing regions collectively generated RM449.1 million in revenue, and most of them exhibited significant sales growth on a QoQ basis. However, due to the appreciation of the Malaysian Ringgit, revenue after foreign currency conversion showed a 3.6% decline. This, in turn, explains the slight decrease compared to the previous quarter (Q2FY25).

While revenue showed resilience, net profit surged to a record high, thanks to an improved profit before tax (PBT) margin. This margin improvement was driven by multiple factors, including lower freight costs, as shipping rates have begun to normalize following the disruptions caused by the Red Sea Crisis in Q2FY25. Furthermore, DXN benefited from significantly lower foreign exchange (forex) losses compared to the previous quarter, further strengthening its profitability.

In addition to its growing profitability, DXN has demonstrated strong cash flow generation, which continues to support consistent dividend distributions. As of November 30, 2024, the company generated approximately RM350.3 million in operating cash flow—an impressive 53.5% increase compared to the previous year. Consequently, DXN declared an interim dividend of one sen per share, payable on March 7, 2025. This brings the total dividend payout ratio to 55.0% for the first nine months of FY2025 (9MFY25), aligning with the company’s dividend policy of distributing at least 50% of its consolidated profit after tax to shareholders annually.

Moreover, DXN maintains a strong balance sheet with a solid net cash position. As of November 30, 2024, the company held RM695.2 million in cash and cash equivalents, while total loans and borrowings stood at RM165.4 million. This financial strength provides a solid foundation for future expansion.

Looking ahead, DXN has earmarked RM126.8 million in capital expenditures for FY2025, which will be strategically deployed for expanding manufacturing facilities in Malaysia, Dubai, and India; renovating and upgrading its production factory in Mexico; acquiring land in Morocco for future operations; and constructing new manufacturing facilities in Bangladesh and Nepal.

Before wrapping up, management also provided updates on its latest market expansion efforts in Brazil and Argentina. In Brazil, membership has grown steadily, with active members increasing from 1,574 in May 2024 to 2,777 in January 2025. This expansion has driven a significant surge in sales, which grew from BRL 21,514 (approximately RM16,453.50) in May 2024 to BRL 75,439 (approximately RM57,689.40) in January 2025, representing an impressive 250.7% growth.

Meanwhile, in Argentina, where operations commenced in December 2024, the company has already attracted 26,713 active members as of January 2025. Management remains optimistic about the long-term potential of these two markets, anticipating that Brazil and Argentina will contribute significantly to the company’s profitability within the next two to three years.

With DXN currently trading at a price-to-earnings (P/E) ratio of approximately 8.40 times and offering a dividend yield of around 6.61%, the stock appears to be significantly undervalued. Coupled with its strong financial position, expanding global footprint, and steady dividend payouts, DXN presents a compelling investment opportunity with relatively low risk.

So, readers, are you ready to seize this golden opportunity?