Business Summary：
DXN Holdings Bhd, an investment holding company, engages in the manufacture and sale of health supplements and other products; and biodiesel and other incidental products. It also involves in the cultivation of ganoderma and mycelium; manufacture and trading of health food, traditional medicine, various confectioneries, and other food products; wholesale and retail of stationeries, household items, hardware toiletries, gifts, and accessories; and sale, purchase, import, export, and distribution of natural food and vitamin supplements. In addition, the company operates as a travel agent and tour operator; housing developer and contractor; and information technology adviser and consultant. Further, it engages in the research and development of biotechnology, biochemical, agricultural products, and health food supplements; manufacture of monascus, vinegar, and mycelium; cleansing material industries; the formulation of traditional medicines; and cosmetics and beverages businesses. The company primarily operates in Malaysia, India, Philippines, the United States, Australia, China, the United Arab Emirates, and Thailand. DXN Holdings is based in Penang, Malaysia.
MLM & Health Food Supplements Division
The core business for DXN holdings, activities that include cultivation, manufacturing
and marketing of the health food supplements. The company implement direct selling or MLM strategy to market their health food supplements. Other than that, the company also wholesale and retail of stationeries, household items, hardware toiletries, gifts, accessories and skin & personal care products.
Property Division
DXN has launched two major projects during the 2007 financial year, namely “Richmont Residence” located in Jelutong, Penang and a township development project called “STARGATE” in Alor Setar, Kedah. The Penang project has contributed RM10.46 million to the
Group’s earnings during the financial year.
Renewable Energy Division
DXN has successfully completed the demonstration plant and has embarked on its own cultivation activities to grow Jatropha and Castor as the alternative feedstock to palm oil for manufacturing biodiesel.
DXN Holdings Bhd, an investment holding company, engages in the manufacture and sale of health supplements and other products; and biodiesel and other incidental products. It also involves in the cultivation of ganoderma and mycelium; manufacture and trading of health food, traditional medicine, various confectioneries, and other food products; wholesale and retail of stationeries, household items, hardware toiletries, gifts, and accessories; and sale, purchase, import, export, and distribution of natural food and vitamin supplements. In addition, the company operates as a travel agent and tour operator; housing developer and contractor; and information technology adviser and consultant. Further, it engages in the research and development of biotechnology, biochemical, agricultural products, and health food supplements; manufacture of monascus, vinegar, and mycelium; cleansing material industries; the formulation of traditional medicines; and cosmetics and beverages businesses. The company primarily operates in Malaysia, India, Philippines, the United States, Australia, China, the United Arab Emirates, and Thailand. DXN Holdings is based in Penang, Malaysia.
MLM & Health Food Supplements Division
The core business for DXN holdings, activities that include cultivation, manufacturing
and marketing of the health food supplements. The company implement direct selling or MLM strategy to market their health food supplements. Other than that, the company also wholesale and retail of stationeries, household items, hardware toiletries, gifts, accessories and skin & personal care products.
Property Division
DXN has launched two major projects during the 2007 financial year, namely “Richmont Residence” located in Jelutong, Penang and a township development project called “STARGATE” in Alor Setar, Kedah. The Penang project has contributed RM10.46 million to the
Group’s earnings during the financial year.
Renewable Energy Division
DXN has successfully completed the demonstration plant and has embarked on its own cultivation activities to grow Jatropha and Castor as the alternative feedstock to palm oil for manufacturing biodiesel.
Financial Performance:
Years 2004 2005 2006 2007 Average
ROE 20.19 21.87 18.33 17.21 19.4 > 10
ROA 15.52 15.56 9.71 8.44 12.31 > 10
Total Liabilities : Equity = 49.4 : 50.6
D/E Ratio = 0.64
P/E Ratio = 5.28
DY = 5.8
Average Revenue growth rate = 14.01% (5 years)
Average Earnings growth rate = 12.83% (5 years)
Supporting Value:
1. NTA (as at 31/8/2007)= RM0.655 > RM0.52 (as at 2/1/2008)2. The management level staff especially the director level starting to increase company share.
3. DXN have an efficient management team (can also refer to the strong ROE).
4. The pick-up of oversea MLM Business:
DXN's MLM business has penetrated into more than 30 countries, including China, India, USA, Middle East & etc. DXN has added a lot of new branches in It is an international MLM company. The MLM business achieve a strong growth in oversea (80% of MLM sales). In Malaysia, compare to other MLM companies, DXN had sucessfully penetrated into Malay market, and achieved a great market share. DXN has introduced 8 new organic products ranging from beverages to health supplements recently.
In addition, the company has raised its MLM product prices sold overseas by 10-30% in 1QFY02/08. The full impact of this price rise will be felt from 2QFY02/08 onward.
5. The pick-up of Property Division:
The phase 1 of STARGATE project in Alor Star as all the 222 units of shops-office buildings have been fully booked (not yet take into account for 2007 financial year), the property segment is anticipated to contribute more significantly to the Group’s earnings in the next financial year. (If you have been visited Alor Star recently, you will feel the a big different between STARGATE projects with the existing properties in Alor Star. It will be symbolize a big changes for Alor Star city from an "traditional town image" to a new township. The first phase project include a hypermarket, 88 units 3-storey shopoffices,..............More details can refer the link below:
The phase 1 of STARGATE project in Alor Star as all the 222 units of shops-office buildings have been fully booked (not yet take into account for 2007 financial year), the property segment is anticipated to contribute more significantly to the Group’s earnings in the next financial year. (If you have been visited Alor Star recently, you will feel the a big different between STARGATE projects with the existing properties in Alor Star. It will be symbolize a big changes for Alor Star city from an "traditional town image" to a new township. The first phase project include a hypermarket, 88 units 3-storey shopoffices,..............More details can refer the link below:
www.wtwy.com/report/wtwReport/PropertyMarket2007.pdf
DXN Holdings Bhd and Taglink Capital Sdn Bhd have proposed jointly develop a mixed development project called “Stargate Autocity” in Kedah via a special purpose vehicle (SPV).
DXN Holdings Bhd and Taglink Capital Sdn Bhd have proposed jointly develop a mixed development project called “Stargate Autocity” in Kedah via a special purpose vehicle (SPV).
6. The pick-up of Renewable Energy Division:
DXN has proven that it has its own internal strength and expertise in the biotech field to explore into biodiesel or other renewable energy. Considering the volatility of the trend of CPO (crude palm oil) price movement, most analysts believe that the price will still move upward in the near future thus, making the return of biodiesel processing from CPO to be uncertain. So, by using alternative such as jatropha to produce biodiesel will be more competitive. (From my studies, Jatropha will replace palm oil as the raw material to produce biodiesel in the near future. It is more easy and lower cost to plant compare to oil palm. It also takes shorter time to growth, and it's fruit can abstract higher percentage of oil than oil palm, the steps & process to produce biodiesel also more simple than oil palm).
DXN has proven that it has its own internal strength and expertise in the biotech field to explore into biodiesel or other renewable energy. Considering the volatility of the trend of CPO (crude palm oil) price movement, most analysts believe that the price will still move upward in the near future thus, making the return of biodiesel processing from CPO to be uncertain. So, by using alternative such as jatropha to produce biodiesel will be more competitive. (From my studies, Jatropha will replace palm oil as the raw material to produce biodiesel in the near future. It is more easy and lower cost to plant compare to oil palm. It also takes shorter time to growth, and it's fruit can abstract higher percentage of oil than oil palm, the steps & process to produce biodiesel also more simple than oil palm).
Further Jatropha information please refer the links below:
http://en.wikipedia.org/wiki/Jatropha
http://thestar.com.my/news/story.asp?file=/2007/5/18/nation/17762012&sec=nation
7. DXN is included in the same page of the beneficiaries of the Northern Corridor Project (NCER) , because they are based in Kedah and are classified as agricultural products.
8. Thanks to the government new policy, EPF holders can withdraw their savings from their account 2 to part finance their first or second house. It will increase the demand of the property investment industry.
8. Thanks to the government new policy, EPF holders can withdraw their savings from their account 2 to part finance their first or second house. It will increase the demand of the property investment industry.
Investment Risks:
1. More exciting MLM players in the markets that DXN operates in, which may offer better compensation schemes and cheaper products. The uncertainty currencies exchange between RM with USD will affect the company earnings as well.
2. The increasing construction material cost around the world will affect the profit margin of the property division.
2. The increasing construction material cost around the world will affect the profit margin of the property division.
3. Execution risk for its biodiesel ventures.
Conclusion:
I recommend DXN because it is one of the undervalue stock in the current market with stable REO. It's current value (RM0.52) is lower than it's NTA per share (RM0.655). Its core business of the manufacture and sale of health supplements via direct selling into overseas markets (80% of MLM sales) that has an edge over its competitors. This is achievable via its strong foothold in the regional market, in particular, the Philippines and India. DXN has an ability to control the supply chain in both upstream and downstream operations. With the strong networking connection in Kedah, DXN has diversification into the property sector with two fairly successful projects in Penang and Kedah. It will be a bright future for DXN in next financial year.
Conclusion:
I recommend DXN because it is one of the undervalue stock in the current market with stable REO. It's current value (RM0.52) is lower than it's NTA per share (RM0.655). Its core business of the manufacture and sale of health supplements via direct selling into overseas markets (80% of MLM sales) that has an edge over its competitors. This is achievable via its strong foothold in the regional market, in particular, the Philippines and India. DXN has an ability to control the supply chain in both upstream and downstream operations. With the strong networking connection in Kedah, DXN has diversification into the property sector with two fairly successful projects in Penang and Kedah. It will be a bright future for DXN in next financial year.
8 comments:
Good analysis...
i agree on the fundamental investment. but things must see from long term.
like 5 years, 10 years data, to make sure it's business performance.
frankly speaking, you urself buy DXN prduct or not?
I can't see the moat of this business.
let's share n study together
Hi Freeman,
Thanx for your comments.
DXN listed on KLCI in year 2003. So, it is a limitation for me to gather 10 years data. Sorry man.
My family did bought the products, although we are not the distributor. DXN is now building their brand image. They allocate a portion of their earnings for bilboards, magazines and other advertisement.
In my opinion, DXN do not show a strong moat in the MLM business, may be for me MLM business in the current market have less moat, because once other companies give higher incentives or come out with super plan, the distributors will jump from a company to another company.
But one important thing is that, DXN have quality products, and in the local market, they choose the right strategy, is to target Malay market. As we know that, Malays population in Malaysia is more than double than Chinese even plus Indian. And Malay culture is a bit different than Chinese, they are more live in a group than other races, they like to share trust with their people.
For me, the moats of DXN appear in the Property and Energy Renewable Division.
DXN headquarter is in Alor Star, it can be say is a 'local company' in Kedah. It can be said is a star in Alor Star. DXN has a good relationship with the Kedah government, as we can see all their property project focus on the north region especially penang and alor star. STARGATE project is a good start for DXN in Alor Star property industry. The sucess of the project will build a great reputation and trust with local goverment and in resident mind. (But DXN have to make sure no failure in the project)It has create a strong moat for DXN.
For Energy Renewable Division, DXN can be say as the pioneer for study in Jatropha biodiesel in Malaysia. With the experience in the biotechnology for the existing R&D team and the support from local government and USA investor,it will create another moat for DXN.
Hope to heard more from you. Pls advice.
Thanx!
Hi jeff,
I have read through youur thread and found your analysis on DXN is quite interesting and it is helpful as I now more understand to DXN Holdings.
For ur information, I bought DXN Holdings 1.5 year ago but due to personal financial problem so I sold it after half year of holding it.
The reason that I bought DXN was because it was consumer stock which has moderate ROE of average 18% for the past 3 years.
However, I found DXN is now distracting from its core business of selling DXN products. Instead it is involving into construction sector which I dont like at all. Why the management want to involve into the sector that they are familiar with. Is it because their relationship good with the Kedah Government so they would like to involve into construction sector.
I dont trust political relationship will last long and there might be having some corruption and graft giving to the government which I doubt.
In addition, I dont think construction sector is a good aspect to the shareholder. As you could see, DXN's ROE is decreaing which I think is due to the involvement into the construction sector.
I think the involvement into construction sector is 1 of the reasons I sold DXN other than my personal financial distress. So the management is in fact not utilising the capital efficiently.
Anyway, I really appreciate your analysis and it is really excellent. Thanks!
Regards,
kinwing
Dear Kin Wing,
Thanks for your comments, i appreciate it very much.
In my opinion, for an Kedah and Alor Star based company like DXN which involve in consumer products industry for many years especially in Alor Star and Kedah area, they have deep understanding in Alor Star and Kedah market and needs better than other companies and other states.It was proved by the success story in the “Richmont Residence” located in Jelutong, Penang and the fully sold of the Phase 1 development project called “STARGATE” in Alor Setar, Kedah.
If DXN involve in the property development in other location such as Klang Valley, Kuantan, Seremban area which out of Kedah area, I will definately feel worry and a question mark about the diversification of DXN to property industry.
Having good relationship with the local government is just another 'bonus' for DXN in the property industry development, to ignore other unnecessary problem. They take the good chance to fully utilize their relationship and networking with the local government to expand DXN income source.
In my opinion, if the company diversify into other proven industry, which did not affect its core business operation, it still a space for growth in their eranings.
Hope to learn from each other ya. Wish you a great investing in the future.
Cheers~~~~
noted... may, haunted by previous MLM exp. So when the time i dun hv confident at tis kind of business, i rather avoid it. Ur analysis is gd. keep on d gd work.
Thanx for your support man!
Do the recent general election result affect your analysis on DXN Holdings?
Affiliate Marketing On The Internet
Affiliate Marketing is a performance based sales technique used by companies to expand their reach into the internet at low costs. This commission based program allows affiliate marketers to place ads on their websites or other advertising efforts such as email distribution in exchange for payment of a small commission when a sale results.
www.onlineuniversalwork.com
Post a Comment