Summary

• Above expectations. For 3Q24, REXIT registered a core PATMI of RM3.4m, declined 14.5% QoQ, but jumped 57.0% YoY, bringing the 9MFY24 core PATMI to RM10.3m. The core earnings for 9MFY24 came in above our expectation, accounting to 89.7% of our earnings forecast of RM11.4m and 87.7% of consensus estimates. The key deviation was due to higher-than-expected hardware, systems software sales and software sales and services for FY24.

• QoQ. Core net profit declined 14.5% from RM4.0m to RM3.4m as revenue slid 10.4% to RM8.4m due to lower hardware and system software sales for the quarter. Despite lower core PATMI, we noticed core PATMI margin stabilized around 41% as compared to 43% in the previous quarter.

• YTD. For 9MFY24, core net profit rose 39.9% YoY, in tandem with the increase in revenue by 26.4% to RM24.7m on the back of overall improvements in hardware, system software sales and software sales and services in 2Q24.

• Outlook. Despite the emergence of the new management, overall business operations remain sturdy as shown in the growth of top- and bottom-line, coupled with strong PAT margins, which stood at 40-43% for the past 2 quarters. We are optimistic that REXIT has appointed Mr Wong Tack Heng, who is a seasoned professional, having solid experience in spearheading technology initiatives across various industries as COO, while Datuk Seow Gim Shen, who has strong experience in leading local and Nasdaq-listed companies, becoming the CEO.

• Net cash position. As at 9MFY24, REXIT’s net cash position stood at RM28.2m (13.9% of the market cap), translating to a net cash per share of 16.3 sen, this will be able to support the capex in the future.

Valuation & Recommendation

• Maintained forecast. Given the core PATMI came in above expectations, we revised the earnings for FY24f-25f by 14.5-20.2% to RM13.1m-14.4m factoring in higher hardware and system software sales for the years.

• Upgrade to Hold with TP of RM1.16. With the revision of earnings, we upgrade the recommendation to Hold (from Sell) with a TP of RM1.16 as we roll over to FY25f. The TP is derived by ascribing a 14.0x P/E pegged to FY25f EPS of 8.3sen. Also, we assumed a payout ratio of 70.0% of its distributable income from FY24-25f, translating to dividend per share of 5.3-5.8 sen.

Source: Mplus Research - 21 May 2024