SINGAPORE (July 20): CIMB continues to rate Best World International an “add” with higher target price of $1.70 given nearly half of 1Q17 sales for the group came from China.
In a Thursday report, analyst Jonathan Seow says, “While the group’s phenomenal earnings growth of more than 100% p.a. in FY15 and FY16 was led by Taiwan, we expect China to provide the next phase of expansion, driven by increased product acceptance and distributor penetration.”
See: Another strong earnings beat by direct-seller Best World
Best World reported “robust” growth of 103% y-o-y and the analyst believes that this magnitude of growth can continue for the next one to two years.
Management has also set its sights on becoming one China’s top 15 direct-selling companies by 2020, which implies a five-year sales CAGR of 33%.
“However, we think this timeline may be conservative, given 1Q17’s strong sales growth,” says Seow who expects the group to benefit from full conversion of export sales in China to direct sales.
Seow adds that his current earnings forecasts does not yet fully account for the additional revenue the company could recognise once it starts selling their products at a higher distributor price.
Management has also highlighted M&As as part of its growth strategy and is eyeing Japan as the next market to break into.
“The group has net cash of about $50 million (at end 1Q17) to support such inorganic growth,” says Seow.
Shares in Best World are trading 2 cents higher at $1.51 as of 11.21am.
