Excerpts from Maybank Kim Eng report

Analyst: John Cheong, CFA


We expect the growth momentum to continue, as BEST enters into the seasonally strongest quarter in 4Q, where its anniversary promotions take place. We raise FY16-18E EPS by 2-4% after increasing our China sales assumptions.


group11.16
Maintain BUY and raise TP 2% to SGD2.16 from SGD2.11 (the previous TP of SGD2.63 adjusted for 1-for-4 bonus shares issued). Our TP is still pegged to 16x FY17E EPS, on par with peers’ average. BEST is trading at a 26%/31% discount to the average of peers’ FY16E/17E P/E despite having the second highest growth profile.

The strong growth in China was due to higher demand for DR’s Secret line of skincare products, especially after the initial approval of the direct selling licence announced on 1 Jul 2016. 

china11.16The direct selling licence has been officially obtained after fulfilling the final requirements in verification of nine service centres in Hangzhou. This will allow BEST to scale up quicker by increasing its recruitment activities moving forward.

Taiwan revenue grew 95% YoY, but fell 21% QoQ due to seasonality effect, where distributors prepare for the anniversary promotions during OctNov. Our channel check from the Facebook page of its Taiwan distributors suggests the sales in Oct are reflecting the typical seasonal strength.

taiwan11.16Also, BEST’s inventory days have increased to 195 days from 111 days in 2Q16, as it stocked up in anticipation of higher orders and to prevent stock-shortage issues it faced in 4Q15


JohnCheong6.16Maybank Kim Eng analyst John CheongUpside

◊ Increasing market discovery could re-rate the stock. A longer-term 3-yr scenario incorporating a 16x peer P/E in FY18 suggests 75% upside to a TP of SGD2.62.

 Robust growth in China after the approval of direct selling licence.

 Successful expansion in Taiwan, Indonesia and Philippines.

 Expansion into new markets such as the Middle East.

 Full report here.

What company says .... --->>

banchin8.16"....while local authorities and the Department of Commerce for Zhejiang Province has completed the verification of the setup of 9 service centres in Hangzhou, the Ministry of Commerce (MOFCOM) has not announced the completion of the verification in its website. As a result, we have not commenced direct selling through these 9 service centres. Therefore, the current revenue in China has no relation to the setup of the service centres in Hangzhou."

-- Huang Ban Chin, executive director, Best World International
LQM 0094FFWe constantly build the DR’s Secret brand to stand for a simple and safe solution for anyone who wishes to be able to effectively resolve their skin problems and achieve healthy, glowing complexion, without the need for makeup."

-- Huang Ban Chin, executive director, Best World International

(Source: Company announcement posted on SGX)



You may also be interested in:


You have no rights to post comments

Counter NameLastChange
AEM Holdings3.280-0.020
Avi-Tech Electronics0.250-0.005
Best World1.680-
Broadway Ind0.0920.002
China Sunsine0.3950.005
ComfortDelGro1.3000.010
Delfi Limited1.1300.010
Food Empire1.090-
Fortress Minerals0.3100.010
Geo Energy Res0.280-
GSS Energy0.028-
Hong Leong Finance2.4800.010
Hongkong Land (USD)3.190-
InnoTek0.4150.010
ISDN Holdings0.330-0.005
ISOTeam0.040-
IX Biopharma0.043-
Jiutian Chemical0.0260.001
KSH Holdings0.290-
Leader Env0.0530.003
Medtecs Intl0.1400.004
Nordic Group0.400-
Oxley Holdings0.100-
REX International0.166-0.002
Riverstone0.610-0.015
Sinostar PEC0.135-
Southern Alliance Mining0.670-0.005
Straco Corp.0.470-0.015
Sunpower Group0.240-
The Trendlines0.0910.001
Totm Technologies0.038-
Uni-Asia Group0.905-0.030
Wilmar Intl3.6200.010
Yangzijiang Shipbldg1.4900.040
 

We have 1456 guests and no members online

rss_2 NextInsight - Latest News