Best World: 4Q15 net profit spiked 81% y/y to $3.7m, bringing FY15 earnings to a 7-year record high of $10.1m (+149%), 11% above Maybank KE's initial estimates of $9.1m.
The strong results for the final quarter came on a 64% surge in revenue to $40.9m, on sustained growth momentum in Taiwan (+146%) and Indonesia (+467%) through a series of successful marketing campaigns which led to increased product acceptance, and higher export orders and increased contribution from manufacturing/ wholesale in China (+49%).
At end-2015, the multi-channel distributor has built up a significant sales network across 10 countries in the region, comprising a membership base of 402,422 ('14: 377,830, '13: 298,251).
Meanwhile, bottom line gains were partially pared by a one-time tax expense of $3.2m due to an unsuccessful appeal of a 2008 tax liability stemming from its Indonesia subsidiary.
Balance sheet remains plump, with net cash of $47.2m (3Q15: $39.9m), representing $0.215/share or 54% of current market cap.
Management has proposed a final DPS of 1.5¢, bringing FY15 total DPS to 2¢ (FY14: 0.8¢), maintaining its payout ratio at 43.5%.
The final approval for its direct-selling licence in China remains on track to be received sometime between Mar '16 and Mar '17. If it succeeds, management foresees a rise in profitability stemming from a shift in sales mix towards the more profitable segment, boosting bottom line further on operational leverage.
The stock is currently trading at FY15 P/E of 8.6x, 39% discount to larger peers' average of 14.2x. Taking cue from its impressive growth profile, we do not rule out increased research coverage on the company, giving Best World a much-needed boost in visibility to investors and provide an upward re-rating for the counter.
Pegging a conservative P/E of 12x to the stock would give a valuation of $0.55, implying a 40% upside.
Best World is a key constituent in the Market Insight Growth portfolio.
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