Best World International - Direct seller gains traction

Earnings surge on operational leverage
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.

9M15 earnings soared 219% YoY to SGD6.4m, exceeding FY14’s record SGD4.1m (+84% YoY). This was achieved mainly from operational leverage on revenue growth of 21% to SGD60.7m, attributed to strong contribution from Taiwan and China, due primarily to greater product demand from increased customer acceptance.

Awaiting licence from China
Best World 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. During the same period, the company reached the final stage of its licence application process, which led to some agents stocking up on inventory to anticipate the approval. If it succeeds, management foresees a rise in profitability, stemming from a shift in sales mix and further operational leverage.

Technical Analysis
Daily Chart
Respectable yield backed by net cash pile; trading at 36% discount to peers
As at end-3Q15, Best World had net cash of SGD39.9m or SGD0.181/share. This represents 52% of its current market cap, underpinned by free cash flow generation of SGD8.7m in FY14. Based on FY14’s payout ratio of 43.5% and trailing 12M profit, dividend yield is at a respectable 4.8% at SGD0.35/share. The stock is currently priced at 9.1x trailing P/E and 4.4x on an ex-cash basis, compared to larger peers’ average of 14.2x. (Read Report)

Source : Maybank Kim Eng Research

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