Summary

• Recap. For 3Q24, REXIT recorded a core PAT of RM3.4m, declined 14.5% QoQ, but jumping 57.0% YoY, bringing the 9MFY24 core PAT to RM10.3m. The core earnings were above our expectations, accounting for 89.7% of our earnings forecast of RM11.4m and 87.7% of consensus estimates.

• Net cash position… We like REXIT’s balance sheet with zero borrowings, resulting in its solid net cash position. As at 9MFY24, REXIT’s net cash position stood at RM28.2m, translating to a net cash per share of 16.3 sen, this may allow more rewards in terms of dividend and capex going forward.

• …with solid dividend track record. Over the past 10 years, REXIT has been rewarding its shareholders with growing dividends in the range of 1.5-5 sen of dividends, providing at least 4-5% dividend yield per annum. We believe this trend may continue even with the emergence of the new management.

• Outlook. Overall business operations remain as usual for now, and we expect the growth of revenue and earnings to be maintained. Additionally, the PAT margins should remain above 40% as the PAT margins for 9M24 stood at 41.6%. Although we are awaiting guidance from the new management, we are positive that REXIT will be able to generate decent and stable growth after the appointment of Mr Wong Tack Heng (a seasoned professional with solid experience in spearheading technology initiatives across various industries) as COO and Datuk Seow Gim Shen (who has strong experience in leading local and Nasdaq-listed companies) as CEO.

Valuation & Recommendation

• Forecast. Unchanged, with the earnings forecast remained at RM13.1m-14.4m for FY24f-25f.

• Upgrade to BUY with unchanged TP of RM1.16. Since the share price has retraced to RM0.94, we upgrade from Hold to Buy with a TP of RM1.16. The TP of RM1.16 is derived by ascribing a P/E of 14.0x 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 - 23 Jul 2024