The Company was incorporated in Malaysia under the Companies Act 1965 on 11 October 1995 as a private limited company under the name of Magcure Marketing Sdn Bhd and is deemed registered under the Act. On 3 August 1998, the Company changed its name from Magcure Marketing Sdn Bhd to DXN Holding Sdn Bhd and subsequently changed its name to DXN Holdings Sdn Bhd on 21 June 2002. The Company was converted into a public limited company on 16 July 2002.
The Group is a global health-oriented and wellness direct-selling group of companies. The history of the Group’s business can be traced back to when DSLJ, who in his efforts to promote the potential health benefits of Ganoderma, also known as Lingzhi or Reishi, established DXN Marketing in Kedah, Malaysia which commenced operations in 1995. Under his stewardship, the Group expanded its presence from being solely in the Malaysian market to international markets.
Use of proceeds
Repayment of bank borrowings - 65.80% (within 12 months)
Working capital - 14.40% (within 6 months)
Defray fees and expenses relating to the IPO and Listing - 19.80% (within 3 months)
Repayment of bank borrowings - 65.80% (within 12 months)
The company intends to use RM80.0 million of the proceeds from the Public Issue to repay the following banking facilities:
Working capital - 14.40% (within 6 months)
The company intends to allocate approximately RM17.5 million of the proceeds from the Public Issue to supplement the working capital requirements of the Group, mainly for the purchase of the primary raw materials used to produce the finished goods, including coffee powder, non-dairy creamer, sugar, cocoa powder and wheat cereal powder, and primary packaging materials, including aluminum foil, empty capsules, labels, and plastic containers.
Business model
The company is a global health-oriented and wellness direct-selling company. They have a portfolio of 327 stock-keeping units (“SKUs' ') of health-oriented and wellness consumer products that they manufacture in-house and a distribution footprint (including the sales branches and distributors) in 48 countries as at the LPD. The company has 79 sales branches to distribute goods to its Members and they partner with 12 exclusive external distribution agencies as at the LPD. They have over 14.9 million registered Members and over 3.6 million active Members (as defined below) in more than 180 countries as at the LPD. They were ranked among the top 10 players based on total sales in the direct selling industry in Peru and Bolivia in 2022 according to Frost & Sullivan
The company operates a vertically integrated supply chain with in-house research, cultivation, and manufacturing functions. They carry out the research through an in-house team of about 81 research staff across two research facilities in Malaysia and China. The company also operates six cultivation facilities and 10 manufacturing facilities across Malaysia, China, India, Indonesia, and Mexico. They also have a cultivation facility and two manufacturing facilities in the pipeline which the company expects to complete by the second quarter of 2023. The company uses its research facilities to develop new products and to study and improve the cultivation and manufacturing techniques; the cultivation facilities to produce Ganoderma, Spirulina, and various other herbs and ingredients; and the manufacturing facilities to manufacture the finished capsules, tablets, powdered beverages, and liquid beverages. In FYE 28 February 2022, approximately 90.9% of the direct selling products sold (based on gross revenue contribution) were manufactured in-house, with tight control over the production process.
The company has built a health-focused business platform anchored by almost three decades of institutional learning and a corporate culture constructed around the vision of DLSJ. The company believes that the business expansion has been a result of its quality product portfolio, integrated production capabilities, and global distribution network as illustrated below:
Financial Highlights
The following table sets out the selected historical consolidated financial data for the financial years/periods indicated
The revenue decreased from RM 1.104 bil (FYE 2020) to RM 1.05 bil (FYE 2021) and increased to RM 1.242 bil (FYE 2022). bfirfiqfbre
The gross profit margin is consistently above 80% which is above the average benchmark of 20%. (Generally, a GP margin of 20% is considered high/ good).
PAT margin decreased from 31.5% (FYE 2020) to 29.2% (FYE 2022).
The gearing ratio is 0.3 times, and the company’s debt is under a healthy ratio. This also indicates that the company is not highly leveraged, which means it is better equipped to handle crises. (A good gearing ratio should be between 0.25 – 0.5).
Major customer and Supplier
Major Customers
The company's customers are its Members (including stockists), non-Members, and external distribution agencies.
There are no individual customers who contributed more than 5.0% of the Group’s revenue in each of the FYE 29 February 2020, FYE 28 February 2021, FYE 28 February 2022, and FPE 31 October 2022. The company is not dependent on any particular customer. Therefore, the company will not involve in high-concentration customer risk.
Major Suppliers
The company’s suppliers are third parties from whom they purchase its raw materials to cultivate mushrooms (such as rubberwood sawdust and rice chaff), raw materials used in the production of the FFB and HDS products (such as coffee powder, creamer, and sugar), and packaging materials (such as capsules and plastic containers). The company relies on short-term agreements with some of the major suppliers, with purchases from the suppliers conducted on a purchase-order basis. The company also purchases finished goods comprising, among others, F&B (such as tea sachets and Zhi Mint candy), home appliances (such as water filtration systems and kettles), and personal care products (such as soap and hair oil).
The company is not dependent on the major suppliers as they have several suppliers who can provide them with the raw materials, finished goods and packaging material needs to similar specifications and quality. The suppliers normally extend a credit period ranging from 30 to 60 days.
The top five major suppliers and their contribution to the purchases in terms of amount and percentage for the years/period indicated are as follows:
Industry Overview
As per the research report from Frost & Sullivan, the group is positioned with a portfolio of innovative differentiated products, manufactured in-house with capital expenditure similar to that of comparable publicly listed players with manufacturing capabilities. Its success is demonstrated by high-profit margins and a substantial market share in selected products and countries. The Group has the potential to further penetrate the market for FFB, HDS, PCC, and other products within the direct selling industry. Leveraging its established presence across the value chain, with integrated and majority-owned production facilities, the Group has full control of the quality of its products. It aids in obtaining and retaining relevant certifications and ultimately enhances the trust of its members and customers. The R&D capabilities allow the Group to be innovative in expanding its product offering with natural ingredients. Its cultivation capability with facilities located in different countries also allows it to have a stable supply of raw materials and be less affected by exchange rate fluctuations. The combined capability to cultivate and manufacture, coupled with technological advancements, enables the Group to produce the majority of its innovative products in-house. Drawing on its extensive experience in cultivating and manufacturing health-oriented and wellness products, the wellness and retreat center gives the Group another avenue to serve and sell its natural products to its members, further strengthening the brand. The sustainable membership model adopted by the Group allows it to expand the base of members while keeping them active and engaged with reasonable income and rewards. The large base of active members helps to build a strong global distribution network for the Group and focuses on sales. The members of the Group are supported by digital tools, such as the members’ messaging app, the eWorld web, and DXN mobile application, and the possibility to build a personalized website for marketing initiatives. The direct selling activities allow the Group to have a scalable and asset-light business model, which can be easily replicated in new geographical markets, driven by a founder-led and experienced management team.
Source: Frost & Sullivan
Business strategies and prospects for DXN HOLDINGS BHD.
The company intends to pursue the following strategies to grow its business:
Visible pathway to grow in new and existing markets
Catering to changing consumer needs and enhancing Member engagement
Development of new health-oriented and wellness products
Lifestyle offerings
Continued expansion of the vertically-integrated global supply chain
Enhancing the technological ecosystem
Potential for social media to drive direct selling penetration
Seamless supply chain management platform
Enhancement of the Member Portal
MQ Trader View
Opportunities
Business platform with a broad product portfolio and integrated production facilities. The growth in demand in the health-oriented and wellness sector within direct selling is attributed to a changing consumer preference toward quality products with health benefits, while the supply side is driven by factors such as product innovation and integrated manufacturing.
Expansive global distribution network and sustainable direct selling strategies. According to Frost & Sullivan, the global market of direct selling is forecasted to reach USD 183.3 billion by 2026. This growth will be driven by various factors including the expanding base of independent sales representatives, which reached 128.2 million people in 2021.
Robust technology ecosystem to support global operations. As the company is a global health-oriented and wellness platform, the management has focused on IT solutions as the company continues to expand its presence worldwide.
Risk
The majority of the IPO funds are being used for debt repayment rather than for development. This may save some expenses in financing costs (interests expenses), but it does not directly benefit new development or expansion/strengthening of their footprint into new markets.
High level of competition in the direct selling industry. As the market becomes crowded with competitors from various regions, it may pose a challenge to maintain or grow the network of active Members for the coming years.
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