Review

• Rexit’s 1HFY24 net profit of RM6.8mn came in above expectations, accounting for 60.7% of our full-year estimate. The positive variance was mainly due to higher-than-expected sales volume.

• YoY, 1HFY24 net profit surged 32.6% to RM6.8mn, due to increase in hardware, systems software sales, and software sales and services. Meanwhile, the group saw its revenue jump 21.9% to RM16.3mn.

• QoQ, 2QFY24 net profit grew 42.5% to RM4.0mn while revenue was 34.1% higher at RM9.3mn. The stronger earnings performance was largely driven by higher sales from hardware and system software.

• Its balance sheet remains solid with zero debt and a net cash position of RM27.2mn or 14.3sen/share.

Impact

• Given the stronger-than-expected results, we raise FY24/FY25/FY26 earnings forecasts by 4.0%/3.0%/3.9%, respectively, after factoring in higher sales assumptions for both hardware and software.

Outlook

• Generally, we expect Rexit to continue posting resilient revenue with stable growth in the upcoming quarters. Meanwhile, we also view the upside to revenue from ancillary software customisation services.

Valuation & Recommendation

• After revising the earnings forecasts, we revised the target price from RM0.93 to RM0.965 based on unchanged 14xCY24 earnings. Upgrade the stock from Sell to Buy.

Source: TA Research - 23 Feb 2024