Malacca Securities Sdn Bhd maintained its SELL call on Rexit Bhd despite the share price dipping below 90 sen as it is in the view that the current share price is still trading at a premium towards the offer price of 85 sen.
“This 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 price-to-book value (P/B) ratio, the offer price of RM0.85 indicates a price-to-book value (P/B) ratio of 3.0 times,” it said in its Stock Digest today (Feb 23).
The independent research house said after it recommended a SELL on Rexit at RM1.05 following the announcement of the mandatory take-over offer in January 2024, the share price has dipped below 90 sen.
On Feb 17, Datuk Seow Gim Shen, Metaco Assets Holdings Sdn Bhd, and Bemas Holdings Sdn Bhd had extended a formal unconditional mandatory takeover offer to acquire all the remaining ordinary shares in Rexit at 85 sen per share.
The offer reportedly came after the three parties emerged as new substantial shareholders of Rexit on Jan 17, acquiring an aggregate of 92.27 million shares or a 53.27% stake in the group for a total cash consideration of RM78.43 million. The joint offerors also intend to maintain the Rexit’s listing status.
Malacca Securities is now assigning a fair value or target price (TP) at RM0.945 (95 sen), with a upside of upside of 5.6% and 11.1% from last price of RM0.895 (90 sen) and offer price of RM0.85 (85 sen) respectively.
The fair value or TP is derived by ascribing a 14 times price-earnings ratio pegged to FY24f earnings per share (EPS) of 6.9 sen. Also, we assumed a payout ratio of 60% of its distributable income from FY24-FY25f, translating to dividend per share of 4.5 to 4.7 sen.
The research house said Rexit’s first half of the financial year ended on 31 December 2024 (1HFY24) earnings 1H24 earnings came in within its expectation, and as such, it has kept the earnings forecasts unchanged for FY24f to FY25f.
“It accounts for 56.6% of the earnings forecast of RM11.4 million as it believes the earnings may normalise in 2H24,” it said.
In the second quarter of financial year ended on Dec 31 (2Q24), the core profit after tax and minority interests (Patmi) of RM3.7 million, increased 27.9% quarter-on-quarter (QoQ) and 33.7% year-on-year (YoY) respectively, bringing 1HFY24 core Patmi to RM6.5 million.
“The core Patmi was adjusted for the one-off hardware, system software sales, which is RM0.4 million in the bottomline,” it added.
Year-to-date, for 1HFY24, core net profit ose 25.4% YoY to RM6.5 million, 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.”
As for the outlook, Malacca Security believes the administrative expenses will stabilize around this level.
“Meanwhile, the RM1.8 million revenue for the hardware, systems software sales and software sales and services may not recur in the next few quarters.”
As at 1HFY24, Rexit’s net cash position stood at RM27.2 million or 18% of the market capitalization, 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.”
