DXN Holding’s stocks were viewed favourably by Mercury Securities due to its global market presence and established integrated supply chain equipped for an attractive expansion plan.
Also, it is well-positioned to leverage on the growth of the global market size of health and wellness product which is estimated by Frost & Sullivan to grow at a compounded annual growth rate (CAGR) of 10.1% from 2022 to 2026. The CAGR is the measure of an investment’s annual growth rate over time, with the effect of compounding taken into account.
“The target price represents a potential return of 35.7% over the initial public offering price,” said Mercury in the recent IPO Note.
DXN Holdings has established a global market presence in 180 countries, with a particularly noteworthy stronghold in high-growth markets like Peru and Bolivia, with market shares of 33% and 25% respectively. In the financial year 2022, DXN’s oversea segments contributed to 92.9% of their impressive RM1,243 mil gross revenue.
Despite the challenges posed by the COVID-19 pandemic, DXN has achieved a CAGR of 6.1% in revenue from financial year 2020 to financial year 2022, driven by its highly scalable and sustainable business model and an extensive distribution network encompassing 14.9 million registered members with over 3.6 million active members as of LPD.
DXN operates a vertically integrated supply chain in which they in-house manufacture 90.9% of their direct selling products in financial year 2022. DXN currently owns 2 research & development, 6 cultivation, and 10 manufacturing facilities strategically located in Malaysia, China, India, Indonesia, and Mexico.
DXN plans to establish new manufacturing and cultivation facilities in India and China to boost production capacity which is expected to commence in quarter two 2023.
DXN plans to enter into 5 additional markets in Latin America and Africa region by 2024. Since its privatisation in 2011, the company achieved an 11-year CAGR of 14.5% for its revenue.
Risk factors identified by Mercury are such as operational non-compliance risk across multiple countries, and product regulatory risk across multiple countries.