DXN: Undemanding valuation supported by strong growth and decent dividend yield

New markets to drive growth After recording a strong FY13-23 bottom-line CAGR of 20.8%, DXN’s strong FY23-26 earnings CAGR of 15% is expected to be fuelled by expansion into new markets, particularly Brazil (Jan 2024) and Argentina (Mar 2024). Additionally, the company is strategically positioning itself to enter the lucrative Chinese market, with plans to pursue direct selling licenses within 2-3 years, once regulatory requirements are met. Historically, DXN has taken 24 to 36 months to establish a foothold in a new market, with the progressive expansion of its active member base serving as a pivotal driver of earnings growth. 

Undemanding valuation Despite its promising prospects, DXN is only trading at an undemanding FY25F P/E of 8.3x (vs MLM peers average P/E 12x), underpinned by strong earnings growth and decent dividend yield of 4.3-5.6% for FY24-26. 

Back to long-term support After correcting 13.1% from 17 Jan’s high of RM0.72 to RM0.625, DXN is currently trading near its long-term support region of RM0.60-0-615. As technical indicators are on the mend, we anticipate the stock to stage an oversold rebound towards RM0.66-0.68-0.72 territory. Cut loss at RM0.58. 

Collection range: RM0.60-0.61-0.625

Upside targets: RM0.66-0.68-0.72

Cut loss: RM0.58

Source: Hong Leong Investment Bank Research - 19 Mar 2024