Article published on Maybank Kim Eng's Market Insight on 19 Feb

Best World is scheduled to release its 4Q15 results after market close next Thu (25 Feb).

founders arrival 400Co-Chairwomen Doreen Tan and Dora Hoan. Photo: CompanyBased on the average 4Q/3Q sequential growth rate of 41% over the past two years, the beauty and health product distributor is estimated to post 48% y/y growth in 4Q15 revenue to $36.8m on the back of greater demand and increased customer acceptance of its products in Taiwan and China. 

This is expected to generate a net profit of $2.9m (+44%) for the quarter, bringing full year earnings to $9.1m (+124%), barring any anomaly in gross margin and admin expenses.

If it materialises, the results would solidify six quarters of impressive earnings growth and give a much-needed fillip to the visibility and appetite for the counter.

While share price performance has been somewhat lacklustre (-1.4%) since the issue of Maybank KE's unrated note in Dec '15, the counter has outperformed the STI (-8.6%), FTSE ST Small Cap Index (-7.9%) and FTSE ST Fledgling Index (-5.1%).

At the current price of $0.345, Best World is valued at an implied P/E of 8.7x, or a 39% discount to peer average of 14.2x.

The stock also offers an indicative dividend yield of 5.2% (based on FY14’s payout ratio of 43.5%), and is backed by a solid balance sheet with net cash of $41.4m, representing 55% of market cap.

Pegging it at a conservative 12x, the stock could be valued at $0.495, implying a 43% upside.

Best World currently sits in the Market Insight Growth Portfolio.

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