DXN Berhad - With Great Potential

For a number of years, the multilevel marketing company used its operating cash flow to diversify into unrelated businesses, from property development and a travel agency to the timber trade and biodiesel production.


In 2008, they made the decision to focus on the MLM business. The transformation has reinvigorated the group’s bottom line. It made a record net profit of RM28.4 million for FY2010 ended Jan 2010, which improved further into a record quarterly net profit of RM10 million in its 1Q2011 ended May 31, 2010.


That was helped by the use of operating cash flow to reduce borrowings. It reduces its net borrowings to RM17.3 million in 1Q from RM31.3 million in the preceding quarter. The group could turn net cash by year end.


All its unrelated businesses have been wound down and losses provided for – except for ongoing property development project in Alor Star. It does not plan to scale up this division. Operating cash flow from the MLM will be ploughed back into the MLM or distributed as dividends.


In 1Q2011, besides savings in interest costs, earnings also grew through the group’s two pronged strategy of opening new markets and broadening its product range

Financial position as at 31 May 2010.

NTA RM0.89
Cash RM43.46 million
Borrowings RM60.88 million

Share Capital RM60.191 mil
Share Premium RM1.78 mil
Treasury Share (RM7.911 mil)
Retained Earning RM154.37 mil
Shareholders Fund RM202.97 mil

Non Current Asset RM119 mil
Current Asset RM188 mil
Current Liabilities RM94 mil
Long Term Liabilities RM6.8 mil

1Q EPS RM0.0445 ( Corresponding 1Q EPS RM0.0216 )
1Q Net Profit RM10.076 million
Projected Annualised EPS RM0.1772
Projected Annualised profit RM40 mil

Number of shares 240.764 million
Share price on 24.9.2010 RM1.13

Look out for the announcement for the 2nd quarter by October 2010. If the EPS is the same or more, then this counter is good to invest in. Recently the company had fix its dividend policy to pay at least 50% of its profit as dividend on a quarterly basis.

If the above profit is maintained, at least RM20 million will be paid as dividend, giving a yield of about 8%.

Fair price RM1.70 ( 10 x projected EPS )