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Amidst the technology stocks rally this year, one particular counter has gone largely unnoticed. Unknown to many, this company is the developer and currently operates the mySalam portal - the Government’s national health protection scheme.
The company is the ACE Market-listed Rexit Bhd (stock code: 0106).

Interestingly, the dividend-paying Rexit has one of the lowest price-to-earnings (PE) ratios in the industry, with sales revenue growing at a compounded annual growth rate of around 30% for the past 6 years.

The company caters to the high-growth Insurance and Financial Services industries, and serves many notable clients across Malaysia, Singapore, Thailand and Hong Kong.
Among them are Allianz, Zurich Insurance, AmAssurance, Sompo Japan, RHB Bank, Al-Rajhi Bank, Public Mutual and Affin Hwang Capital.
Not to be forgotten, it bagged a 5-year outsourcing services deal from Great Eastern Takaful Bhd for the mySalam portal in Jan 2019.
In the tabling of Budget 2021, Finance Minister Tengku Zafrul said that the government will expand mySalam overage to include the cost of medical devices, such as stents for the heart or prosthetics. 
mySalam has paid out RM75mil as of Oct 31 2020, and this comprises just 10% of the estimated RM733mil contributed by Great Eastern to the mySalam fund since its launch in Jan 2019.
The Singapore-based insurance company is meant to contribute RM2 billion to mySalam over five years, or RM400 million a year since 2019.
Rexit’s primary products are as follows:-
  1. e-Cover, an online insurance transaction system that enables a business to deliver products and services electronically and within a short time-to-market.
  2. e-PPA, an online system used by all approved unit trust companies in Malaysia to submit investment and redemption applications to the EPF whenever EPF members invest in selected unit trusts using their EPF contributions.
  3. InfoGuardian, an integrated workflow, case management and document management system that provides and facilitates an on-line information sharing environment for multiple users within and outside the customer’s organisations.
Rexit also provides the electronic link between insurance companies and the Malaysian Road Transport Department (JPJ) through the Reward Link Gateway System. The Reward Link Gateway System enables insurance cover notes of motor vehicles in Malaysia to be transmitted on-line between insurance companies and JPJ.
Diamond in the rough
At just 78 sen per share and a PE of 14 times, Rexit is a strong proxy to the bullish technology sector as well as the Insurance and Financial Services industries. 
The company sits on a cash pile of RM14.3 million with zero debt on its balance sheet, putting it on the right track for expansion and diversification.
Its operations in Guangzhou, China, which was set up for R&D purposes, gives the company strong resources to tap into new business opportunities or projects in the Asian region.
In its Annual report for FY2020 end June 30, the company has said it plans to grow its product offerings in its current markets to boost its recurring income.
“The group will continue its research and development efforts to expand and extend the e-Cover services to the financial services sector and other segments of e-commerce by leveraging on the large 24x7 secured e-Cover infrastructure,” it said.
While Rexit expects a challenging outlook in FY2021 as a result of the COVID-19 pandemic, it is worth noting that its business model has somewhat been “recession-proof”, considering that it has remained profitable since its listing in 2006..
Not only that, while most businesses faced a sharp decline in financial performance during the second quarter of 2020 as a result of the Movement Control Order (MCO), Rexit’s net profit surged by 33% y-o-y on the back of a 14% y-o-y increase in revenue.
In FY2020, despite all the market challenges, Rexit enjoyed a 37% net profit margin, which was an increase from 34.7% in FY2019.
The return on equity, on the other hand, was solid at 24%.
Looking into its balance sheet, the company appears to be an asset-light business as the value of property, plant and equipment only accounted for 10% of its total assets.
Good dividend-yield stock
Since 2006, Rexit has consistently paid annual dividends to shareholders. In FY2020, the dividend payout ratio was 55.46%.
According to malaysiastock.biz (6 Nov 2020), Rexit has the third highest dividend yield (3.85%) across the tech stocks in Malaysia, after Datasonic (5.61%) and Elsoft Research (4.8%).
Rexit is tightly held by major shareholders, who collectively hold over 60% of the outstanding shares, based on official count.
The executive director and chief executive officer Datuk Chung Hon Cheong himself controls over 41% stake in the company.

This leaves the free float in the market at only 25% of outstanding shares.
Growth intact moving forward
  1. Rexit has strong growth potential in the e-government space, having developed and operated the mySalam portal. Its business model and expertise in the IT field can be easily replicated to deliver more online public services as the Government accelerates its IT adoption.
  2. Meanwhile, Rexit’s e-Cover product offering puts the company on the right track to capturing market opportunities in the booming e-commerce segment. The stronger adoption of e-commerce by businesses as a result of the COVID-19 pandemic is undeniably a boon for Rexit.
  3. Most importantly, Rexit is well positioned in the ever-growing insurance and financial services industries. Growing population and the increased awareness for insurance and risk protection will definitely be an organic growth catalyst for Rexit.
  4. The company’s R&D operations in China will help it to easily capture growing market opportunities, by enabling it to mobilise resources across the region for any upcoming projects.
  5. With zero debt and a significant cash pile as major support, Rexit is also well positioned to undertake mergers and acquisitions for inorganic growth moving forward.


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