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Frankly Speaking - Is DXN Holdings (Bursa: DXN) Now a Value Play?
DXN Holdings Bhd has recently caught the attention of many investors, especially with its decision to charter a Gulfstream G550 corporate jet for 12 months. This move is part of the company’s strategy to accelerate its global expansion, sparking discussions about whether DXN is now an undervalued opportunity.
The G550 charter primarily aims to support DXN’s top-performing members, particularly Crown Ambassadors, who frequently travel across key international markets. This includes the Latin American region, which accounted for 57.9% of DXN’s RM1,897.8 million revenue in FYE2024.
With 4.9 million active members globally as of September 2024, DXN’s network is both vast and international, necessitating effective travel options, especially as 11 of DXN’s 13 manufacturing facilities are outside Malaysia, with new plants underway in Bangladesh and Nepal.
Interestingly, rewarding high-performing members with private aircraft access is not unique in the Multi-Level Marketing (MLM) industry; global MLM giant Amway, for instance, offers similar privileges to its top performers and has a fleet that includes five Gulfstream G550 jets. DXN’s charter, however, is structured as an off-balance sheet arrangement, meaning it won’t affect the company’s financial standing. Any refurbishment or additional costs for the aircraft will be borne by the major shareholder, not DXN.
Financially, DXN is in a strong position, sitting on a cash reserve of RM654 million against total liabilities of RM703.6 million, with short- and long-term debts combined at less than RM136 million. The company has a history of consistent dividend payouts, and at its current share price of RM0.475, DXN offers an attractive dividend yield of 7.58%, coupled with a low P/E ratio of 7.67x.
In summary, while the jet charter decision may have raised some eyebrows, the underlying financial health and growth strategy make DXN an appealing value investment. Given its steady performance, generous dividend yield, and deep value, DXN remains a stock to watch.
The future revenue from the sold units of KL48 amounts to RM591.66 million, while the ongoing sales of the remaining unsold units, totaling RM127.90 million, could offer Ecofirst substantial near-term earnings.
DXN is chartering a corporate jet for one year at the rate of US$6.15 million (RM27.1 million) if it uses its own pilots. DXN can deduct the cost of leasing as a business expense, which further makes leasing a more attractive option than buying outright.
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