Investment Merits

1. Recovery Prospect from MLM Division;
2. Opportunity within the Malay Bumiputra Demographic;
3. Recurring Income Potential Underpinned by Consumer Items; and
4. Attractive Dividend Yield.

Earnings Forecast

We reckon FY22 would be the last phase of Beshom’s recent earnings weakness (-17.8% YoY) and expect earnings growth of 32.1/8.9% YoY to RM42.2mn and RM45.9mn for FY23/24. The strong recovery in FY23 is reasonable given that Beshom’s MLM operating subsidiary - Sahajidah Hai-O Marketing (SHOM) would be celebrating its 30th grand anniversary and we have seen recruitment alongside sales momentum could be particularly strong during large-scale bonanza as reflected by the MLM’s remarkable EBIT of RM69.1mn recorded in FY18.

Valuation

We believe Beshom should be valued at 12x CY23 PER. The marginal discount from average of MLM peers is attributed to the increased volatility in Beshom’s earnings in recent financial years and its relatively small market share compared to Amway. Nonetheless, the 12x multiple is supported by i) strong recovery in MLM business correspond to 30th grand anniversary of SHOM, ii) opportunity within the Malay bumiputra demographic, iii) profile of recurring income underpinned by consumer items and iv) attractive net dividend yields.

Source: TA Research - 5 May 2022