Tuesday, December 8, 2015

Best World

Best World: (S$0.345) Direct seller gaining traction; entry into Growth portfolio
Best World's 9M15 earnings soared 219% y/y to $6.4m, exceeding FY14’s record $4.1m (+84%). This was achieved mainly from operational leverage on revenue growth of 21% to $60.7m, attributed to strong contribution from Taiwan and China, due to greater product demand from increased customer acceptance.

Best World is a multi-channel distributor which sells premium skincare, personal-care, nutritional and wellness products. It is also the only direct-selling company listed on SGX, and has presence in 10 countries across the region, supported by a sales force of 388,138 members.

The company is awaiting its direct selling licence in China, and according to management, is expected sometime between Mar 2016 and Mar 2017.

It has already gained entry into this market since 2014 via two distribution channels, export and wholesale. Management guides that products in China grew at a steady pace and saw a tipping point in 4Q14 on customer acceptance.

If the direct selling licence is obtained, management foresees a rise in profitability, stemming from a shift in sales mix and further operational leverage.

As at end-3Q15, Best World had net cash of $39.9m or $0.181/share. This represents 53% of its current market cap, underpinned by free cash flow generation of $8.7m in FY14.

Based on FY14’s payout ratio of 43.5% and trailing 12M profit, dividend yield is at a respectable 4.8% at $0.345/share. The stock is currently priced at 9x trailing P/E and 4.3x on an ex-cash basis, compared to larger peers’ average of 14.2x.

As such, we are including Best World into Market Insight Growth portfolio with an entry price of $0.345.

No comments:

Post a Comment