Why I Like DXN

DXN Holdings is involved in diversified business activities through its subsidiaries. The company manufactures and sells health food, traditional medicine, confectioneries, bio-diesel, household items, gifts and accessories. It also offers travel agency and tour operation, information technology consultancy and advisory services. DXN Holdings core business activities include cultivation, manufacturing and marketing of the health food supplements. Its product lines include dietary supplements, food and beverages, personal care products, household products and water treatment system.

The company operates in five business segments: Multi-level marketing, Property development, Energy, Investment holding and others. The company’s multi-level marketing segment manufactures and sales health supplements and other products on a multi-level marketing basis, in property development business segment it offers housing development and contractor services, in energy segment the company manufactures and sales of bio diesel and other incidental products. The company’s investment holding segment involved in investments and provision of management services, and in others DXN Holdings offers travel agent and tour operator services, information technology consultancy and advisory services, wholesale and retail of stationeries, household items, gifts and accessories.

The company's subsidiaries include: DXN Marketing Sdn, Daxen (NZ), DXN International Pakistan (Private), DXN Herbal Manufacturing (India) Private, Daxen International (Nepal) Pvt, DXN International (Australia) Pty, DXN International (Kenya), and Daxen.

DXN entered into the international market, Mauritius and Singapore with the "One World One Market" concept in 1996. The company’s Malaysian Lingzhi factory received the Good Manufacturing Practice (GMP) certification in 1997. In the same year, the company started its operations in Hong Kong, Brunei, and Indonesia. In 1998, the company started its operations in Thailand.

DXN received the coveted Therapeutic Goods Administration (TGA) certification from the Ministry of Health, Australia in 1999. In the same year, the company started producing high vitality spirulina and also entered the into Philippines market. DCN Network Sdn joined with DXN Holdings in 2000. In the same year, DXN started its operation in Australia, India, New Zealand and Laos.

The company entered the markets of Cyprus, South Africa, USA, Taiwan, Germany, Switzerland, Dubai, Bangladesh, Sri Lanka and Nepal in 2001. In 2003, DXN started its operations in Mexico and Canada and was also listed on the Main Board of the Bursa Malaysia. DXN expanded its manufacturing and marketing activities into China by establishing Daxen Biotechnology Pte in 2004. In the same year, the company acquired 100% stake in Reach Star Enterprise Sdn and Reach Star Cash & Carry Sdn.

The company's subsidiary, PT Daxen Indonesia became an official member of APSKI (Asosiasi Pengusaha Suplemen Kesehatan Indonesia) in 2005. The company’s Laboratory Department received MS ISO/IEC 17025 Certificate of Accreditation for its technical competence, defined scope and operation of a laboratory quality management system in 2006. In the following year, DXN entered the Kenya market. DXN Holdings launched its main stockist in Mongolia, by setting up its first main stockist in Ulaanbaatar in July 2008. In August 2008, the company established a new branch in Jeddah, Saudi Arabia. The company incorporated a wholly owned sub-subsidiary company in Mexico, Known As Daxen Mexico S.A. DE C.V. in April 2009.

For the period ended February 2009 & 2008:

Income Statement

	2009 (cons)	2008 (cons)
Unit	Thousands	Thousands
Total Revenues	276,730.03	225,151.74
Operational Profit (Loss)	31,769.67	32,833.04
Net Profit (Loss)	18,172.24	19,449.06
*

Paid Up 240m shares

The company may have been largely ignored due to its "MLM" business model. I think DXN is easily in a class of its own, way better than Hai-O. Its sustainability and longevity have been evident. Its not a churn and burn type of company. For the first 2 quarters of the new financial year, they have chalked up revenues of RM137.4m and net profit swelled to RM14.224m (more than 78% of the full last 12 month's profits. If you annualise that to RM28.4m, that works out to a very attractive 11.8 sen net EPS, and the share is still below 70 sen, you do the math.

It has RM38m in cash as of February 2009, and that was RM15m more than the previous year. Safe to say that, the figure should be closer to RM50m now or 20 sen per share. Its cashflow is highly positive.

It has RM103.589m in distributable reserves retained earnings, and 13.5m shares bought back as treasury shares. I expect an attractive corporate exercise soon.

Dato’ Dr. Lim Siow Jin, aged 49, Malaysian. He is the founder of DXN and was appointed as Executive Chairman/Chief Executive Officer on 3 April 1996. He graduated in 1984 from the Indian Institute of Technology with a Bachelor of Technology degree in 1984. In 1997, he was conferred the Doctorate of Philosophy (PhD) in Alternative Medicine by the Indian Board of Alternative Medicine. In 2002, he was conferred the Doctorate of Science (Alternative Medicine) by Indian Board of Alternative Medicines, Millennium Award by the International Association of Educators for World Peace, Albert Schweitzer Award by the Positive Life Foundation and Physician of the New Millennium Award by the Alternative Medicines Research Institute (Canada). He worked as an engineer with MUDA Agriculture Development Authority in Kedah from 1984 to 1994 prior to forming DXN. He is currently responsible for setting the directions for the Group’s business strategies, marketing plans and R&D.

I generally frown on MLMs as their products' sustainabilityand attractiveness usually turns out to be usually fads. I like the product range of DXN, proven and sustained over time, giving users genuine benefits. Their eclectic product range:

Health Supplements:
1. Reishi Gano (RG)
2. Ganocelium (GL)
3. RG & GL Powder
4. Andro-G
5. Bee Pollen
6. Roselle Tablet
7. Cordyceps Tablet
8. Cordyceps Capsule
9. Lion’s Mane Mushroom Tablet
10. Spirulina Tablet
11. Spirulina Capsule
12. MycoVeggie
13. Potenzhi
14. Mycovita
15. Monascus
16. Reishilium Powder

Food & Beverage
1. Lingzhi Coffee 3 in 1
2. Lingzhi Black Coffee
3. Lingzhi Coffee 2 in 1
4. Spica Tea
5. Cocozhi
6. Morinzhi
7. Nonizyme
8. DXN Kiwi
9. Roselle Juice
10. Tropik Mango Concentrated & Tropik
Orange Concentrated
11. Spirulina Cereal
12. Pineapple Jam
13. Zhi Mint
14. Cordypine
15. Zhi Mocha
16. Reishi Gano Tea
17. Vita Cafe
18. EuCafe
19. NutriZhi
20. Zhi Ca
21. DXN Vinaigrette
22. Cordyceps Coffee 3 in 1
23. DXN Zhi Mint Plus
24. Morinzyme

Personal Care
1. Tea Tree Cream
2. Gano Massage Oil
3. Ganozhi Soap
4. DXN Ganozhi Shampoo
5. DXN Ganozhi Body Foam
6. Ganozhi Toothpaste
7. Zhimeko Medicated Rub
8. Fresh Perfume
9. DXN Talcum Powder
10. DXN Toiletries Travel Kit

Water Treatment
1. DXN Aquazeon Energy Water System

Skin Care
1. Aloe-V Facial Cleansing Foam
2. Aloe-V Hand & Body Lotion
3. DXN Chubby Baby Oil
4. Ganozhi Lipstick
5. Ganozhi Complete Skin Care Series
6. Ganozhi Complete Skin Care Series Travel Kit
7. DXN Aloe. V Series

Household Products
1. Laundry Compound - Dyna Cleen
2. Multipurpose Cleaner – Sheen
3. Surface Cleaner – Pine Cleen
4. Dish Detergent – Dish Cleen
5. Car Wash – GT-6 Wash ‘N’ Shine
6. Toilet Bowl Cleaner

DXN has proven its critics wrong over a long period of time. The fact that it has managed to transplant its business model in various countries speaks well of its ability to leverage on its scalability. The profitability has mushroomed over the last 2 years, reaping the fruits of their strong execution skills. This counter should be on investors' radar. Considering the maturity and sustainability of its extended business model, the company has easily gone past the manufacturing critical mass and is set to see very strong organic growth ahead. Its a wonder that I do not even see any broker coverage on the stock. Quiet and strong with solid foundations built over time. It has ventured a little into property and has been well received, but that's not the attraction.

Hai-O has went ballistic and seriously, DXN is a lot better than Hai-O, and its barely started to gain support. One can see that they are replicating the Amway business model but with thrust on "Asian heritage, roots and products". Having a grand vision and brilliant ideas is one thing, executing it well is something which gives me a lot of comfort in DXN.


NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.


p/s photos: Angelica Lee Sin Je

Asian Citrus - Who Is At Fault?

Just as I was touching down in HK, I learn of a recent HK listing that went totally apeshit!! The new listing was a company called Asian Citrus. It was not really a new listing more as the introduction of a dual listing, it was already listed on AIM in London, and this HK listing is more of a homecoming of sorts, led by CLSA Asia Pacific Markets. Now the funny thing was the company went for a 1 into 10 share split on 2 November 2009, and that was already reflected in its London share price. The stupid thing was that NOBODY adjust the NAV figure for the split for its HK dual listing of its shares. Prior to the share split, its NAV was RMB 37.30 per share. After the share split, the NAV per share data for its HK listing prospectus was also the same at RMB 37.30 per share.

~ 1.0 Chinese yuan / renminbi = 1.13 HKD

As there are no new issued shares in this listing, so the initial sellers must have been people who had transferred their shares from the London market, in which case they should have been well aware that the London market was trading on a post-split basis and had closed the previous day at 45.75 pence, equivalent to HK$5.89. Technically, the IPO price for HK should be HK$5.89, and it should trade at a slight premium in HK exchange owing to the fact that it will be more liquid.

If you were trading on Thursday, you will find those screens giving company information that Asian Citrus had a NAV of RMB 37.30 and not RMB 3.73. The info provider cannot be blamed as they are just inputting information from the prospectus. The company itself cannot be faulted as its the investment banking unit that collect the fees for doing this kind of work. The company may have to share some of the blame if the CFO / CEO of Asian Citrus never reviewed the document, or if the CFO / CEO was asked to signed off on the document and they actually did.

On Thursday 26 Nov, the stock had opened at a high of HK$51.25 (in the pre-market auction session) and had been falling all morning in HK. The stock was suspended at HK$19.94 at 11:57am, after registering a turnover of 12.72m shares for HK$291.06m in value, or an average HK$22.88 per share. When trading resumed on Friday, it crashed to a closing price of HK$7.10.

The listing of ASIAN CITRUS 00073.HK stock by introduction was managed by CLSA Asia-Pacific Markets. I believe all who bought or sold can get all their losses being reimbursed by CLSA, as I can see the manager of the issue being mainly fully responsible for the documentation. Of course those who lost money will want compensation, what about those who profited, will they be asked to return the gains? I think asking those to made the gains to cough back out the money will be very very hard to do. Its a willing buyer, willing seller, and if I see a willing buyer at HK$51, and I sold, the transaction is legal.

However, the buyers who bought at HK$30-HK$51 are very likely to have RELIED on the NAV figure in doing that trade. One may argue that they should have used the London last traded price as a benchmark. That is a very weak argument as that goes on to impose so many "information hurdles" on what the actions of a fair minded normal person. A normal person is likely to look at the posted or printed NAV, because many recent China linked companies have been benchmarked to its NAV, either as a slight discount to a slight premium. At RMB 37.30, it is so easy to lure a buyer to bid at HK$40 at least as most China related listing usually trade at more than its NAV.

Heads will have to roll, unfortunately. HK Exchange has been VERY SLOW to tackle the matter. CLSA, understandably, has been very quiet, maybe busy consulting or pummeling their in-house fengshui master for NOT alerting them to this major pitfall, ... so bloody close to end of the year, ... thereby fucking up all their Asia bonus plans ... (shit, I have to forfeit the deposit on the new Cayman).



p/s photo: Anjelica Lee Sin Je

Buffett Likes The Mess The US Is In

SMH: Warren Buffett, the world's richest man in the Forbes magazine list, said in a newspaper commentary yesterday that he is buying US stocks even though the American economy is in a "mess".

Mr Buffett, 78, who became known as the Oracle of Omaha because of his fortune-building skills, said he has been buying into US companies even as "fear spreads".

"The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy and the leaks are now turning into a gusher," the head of the Berkshire Hathaway Inc conglomerate wrote in The New York Times.

"In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

"I've been buying American stocks. This is my personal account I'm talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy). If prices keep looking attractive, my non-Berkshire net worth will soon be 100 per cent in United States equities."

The reason, he said, is a key maxim in his outlook: "A simple rule dictates my buying: be fearful when others are greedy and be greedy when others are fearful.

"Most certainly, fear is now widespread, gripping even seasoned investors. But fears regarding the long-term prosperity of the nation's many sound companies make no sense," Mr Buffett said.

"These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records five, 10 and 20 years from now."

Mr Buffett stressed he could not predict how the market would ride out its roller-coaster days in the short-term. "What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up."

Mr Buffett has supported Democrat Barack Obama in the race for the White House, but both Senator Obama and his Republican rival, John McCain, say they agree he would make a good treasury secretary.

Mr Buffett, who is noted for his personal frugality despite his huge fortune, has said in the past he believes the financial markets should be more tightly regulated.

Forbes's annual wealth list published in March, shows Mr Buffett's wealth jumped from $US52 billion ($75 billion) last year to $US62 billion, pushing Microsoft co-founder Bill Gates out of first place.

p/s photos: Angelica Lee Sin Je (this is what I meant by Malaysian girls' sweetness and unassuming beauty)