Review

• Beshom Holdings Bhd (Beshom) registered poorer than expected FY22 results. Core net profit was RM28.6mn, accounting for 90% of ours and 92% of consensus’ full-year estimates. This negative variance was due to lower-than-expected contribution from MLM division and Wholesale division.

• The group proposed a final single tier dividend of 5.0sen/share for 4QFY22, same as the corresponding period last year. This will bring the cumulative DPS to 8.0sen/share, which is lower compared to 9.0sen/share declared in FY21.

• FY22’s revenue slid 22.8% YoY to RM209.6mn mainly due poorer performance of the MLM division (decreased 33.1% YoY) and Wholesale division (decreased 9.3% YoY) despite improvement in the Retail division (increased 3.2% YoY).

• The MLM division’s revenue was adversely affected by inflationary pressure, which reduced members’ purchasing power while new members’ recruitment and renewal were slow. The wholesale division was impacted by various COVID-19 restrictions imposed during the 1HFY21. Improvement in the Retail division was attributed to the aggressive promotion via e-commerce platform and effective sales incentive schemes.

• Adjusted PBT of FY22 slipped 23.3% YoY to RM40.1mn in line with the decline in revenue.

Impact

• We make no change to our earnings forecast.

Outlook

• MLM. Despite the inflationary headwind, we believe that the distributor force will rebound sharply to 90,000 members in FY23 and average revenue per distributor to improve with the reopening of economy. In addition to new members’ recruitment and retention program, Beshom plans to launch promotion campaigns and organize more physical events to improve drive among its distributors.

• Wholesale. With the likelihood of additional movement restrictions slim, the division will continue its recovery momentum in the coming quarters. The group intends to roll out more products in the Wholesale division to diversify its product portfolio and tap new market segments.

• Retail. The division is developing new house brands to increase its product mix and improve margin. Profit margin for this segment will likely improve with ongoing rationalisation exercise to optimize its physical outlet via closing/relocating of non-performing outlets.

Valuation

• We maintain our target price unchanged at RM1.85/share based on 12x CY23 EPS. Reiterate Buy.

Source: TA Research - 27 Jun 2022