BEST WORLD: Valued at 49.5 cents on potentially strong 4Q results

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).

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Co-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.

BEST WORLD: Valued at 49.5 cents on potentially strong 4Q results

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