Review

• Rexit’s 9MFY24 net profit of RM10.3mn came in above expectations, accounting for 87.8% of our full-year estimate. The positive variance was mainly due to higher-than-expected sales volume.

• YoY, 9MFY24 net profit surged 39.9% to RM10.3mn, due to increase in hardware, systems software sales, and software sales and services. Meanwhile, the group saw its revenue jump 26.4% to RM24.7mn.

• QoQ, 3QFY24 net profit fell 14.5% to RM3.4mn while revenue was 10.4% lower at RM8.4mn. The weaker earnings performance was mainly attributed to lower revenue as well as higher administrative expenses as a result of the expenses incurred for the Mandatory General Offer.

• Its balance sheet remains solid with zero debt and a net cash position of RM28.2mn.

Impact

• Given the stronger-than-expected results, we raise FY24/FY25/FY26 earnings forecasts by 15.4%/22.8%/28.5%, respectively, after factoring in higher sales assumptions for both hardware and software.

Outlook

• Generally, we expect the group to continue posting resilient revenue with stable growth, underpinned by increased utilisation of its eCover system by both existing and new customers. The e-Cover system is a proprietary online insurance transaction system, which facilitates insurance companies and their intermediaries to deliver products and services electronically.

Valuation & Recommendation

• After revising the earnings forecasts and rolling forward our valuation base year to CY25, we revised the target price from RM0.965 to RM1.26, based on an unchanged PE multiple of 14.0x CY25F EPS. Maintain a Buy call on the stock.

Source: TA Research - 21 May 2024