MORNING CALL: 24/8/23

TA Securities continues to like Rexit for its resilient business model, exposure to the defensive insurance sector, and strong margins

Transcript

00:00 This morning it's Rexit, one of the region's largest providers for SAAS or Software as

00:07 a Service for the general insurance and financial services industries.

00:11 TAE Securities downgrading the stock from buy to hold, with a lower target price of

00:16 82.5 cent from 84 cent previously.

00:20 Rexit last traded at 81.5 cent.

00:23 Quick results review, FY23 net profit of RM11 million, up 20.9% year-on-year, beat TAE's

00:30 full-year estimates at 116% due to higher than expected revenue, particularly from software

00:37 customisation services.

00:39 Balance sheet is healthy, with cash-on-cash equivalents of RM27.5 million or 15.9 cent

00:47 per share and zero borrowings.

00:49 From FY24 to 26, TAE forecasting Rexit to exhibit resilient revenue with stable growth,

00:56 underpinned by increased utilisation of its e-cover system, plus the upside from ancillary

01:01 software customisation services.

01:04 The research house revising its earnings forecast marginally, shaving off 0.1% for FY24 to RM10

01:12 million and raising FY25 estimates by 0.4% to RM10.5 million as it imputes FY23 year-end

01:19 figures into its model.

01:21 It also introduced its FY26 earnings estimate of RM10.9 million.

01:27 As TAE rolls forward its base year valuation to calendar year 2024, its target price for

01:32 Rexit is revised slightly lower based on a target PE of 14 times, which aligns with the

01:37 stock's five-year mean.

01:39 It said it downgraded its recommendation on the narrowed risk-reward potential.

01:44 It continues to like Rexit, though, for its resilient business model, exposure to the

01:49 defensive insurance sector and strong margins.

01:52 According to Bloomberg data, only TAE covers Rexit, so that's one hold, target price

01:57 82.5 cent, which is about 1.2% higher than Rexit's last close of 81.5 cent.

02:03 [MUSIC]