Highest return on equity over three years
Rexit Bhd - Running a low-revenue, high-margin business efficiently
Business application solutions provider Rexit Bhd has come a long way from being a mere four-person operation in 1998.
Today, the ACE Market-listed company that made its debut in 2005 focuses on delivering solutions and services to the financial services sector, particularly the general insurance industry.
The group offers several web-based insurance solutions that cater for the front-end marketing and sales functions, as well as the back-end operations and management requirements of insurance companies.
Not only does Rexit have the financial capacity to undertake large IT projects but it also has the experience of managing large IT infrastructures. Its business model is the provision of software as a service (SaaS), which is based on a pay-per-use basis — an arrangement that Rexit has recognised can benefit its clients, as there is no need for upfront capital expenditure for the application and its required hardware.
The group has also expanded the SaaS model to include the Malaysian unit trust industry, following its appointment by the Federation of Investment Managers Malaysia (FIMM) as the third-party administrator for electronic submissions by their member companies to the Employees Provident Fund (EPF).
Rexit’s return on equity (ROE) to shareholders — at 23.2% in financial year 2021 (FY2021), 24.4% in FY2020 and 21.5% in FY2019 — translated into a three-year weighted ROE of 23.2%, which is well above that of its peers.
Rexit’s consistent ROE performance — a measure of a company’s profitability and how efficiently it generates those profits — made it the winner of the Highest Return on Equity Over Three Years for companies in the technology sector.
Suffice it to say, Rexit’s management has been efficient in generating income and growth from the investments of its shareholders. Looking at the group’s financial performance in recent years, it is also obvious that Rexit has been operating a low-revenue, high-margin business.
Between FY2019 and FY2021, Rexit’s profit climbed steadily from about RM7.9 million to about RM9.9 million, generated from annual revenues of between RM22 million and RM25.5 million, with lucrative net margins of 35% to 39%.
In Rexit’s annual report 2021, chairman and independent non-executive director Datuk Ng Kam Chiu notes that the group’s operating environment, whether in the pandemic or endemic stage, will remain very challenging for a period of time.
The use of digital channels to conduct e-commerce transactions 24/7, and from anywhere with internet connection, is also going to be the way of doing business for a long time, he says.
“To prepare for the future, we recognise the need to strengthen Rexit’s competitive edge in the provision of secure, dependable, trustworthy, reliable service and, more importantly, service availability 24/7 to our clients and have taken action to upgrade our assets and migrate to a Tier 3 data centre at TM One, Brickfields,” he says.
Ng believes the phased reopening of the economy in the endemic stage it likely to unleash a host of uncertainties, drawing from the experience of other countries.
“We have to diligently monitor the business environment and take necessary proactive measures to identify potential threats that will have a negative impact on Rexit. Any occurrence of unanticipated and unwelcomed incidents would certainly weigh on Rexit’s bottom line,” he says.
Barring unforeseen circumstances, Ng says Rexit hopes to produce a set of positive results for the next financial year.
Rexit is 40.95%-owned by Rexit Venture Sdn Bhd, a private vehicle co-owned by group CEO Datuk Chung Hon Cheong and chief operating officer Si Tho Yoke Meng.
Global Hartabumi Sdn Bhd — jointly owned by Rexit non-executive director Datuk Abdul Murad Khalid and his son Mohd Azmil — is the second-largest shareholder, with an 11.87% stake. Abdul Murad was executive director of RHB Bank Bhd between January and September 1999.
Meanwhile, Rexit non-executive director Kuah Hun Liang is the third-largest shareholder, with a 10.38% stake. He also sits on the board of MPHB Capital Bhd and Multi-Purpose Capital Holdings Bhd as an independent director.