Review

• Beshom Holdings Bhd (Beshom) registered a full-year core net profit of RM14.6mn in FY23, came in at 85% and 89% of our forecast and consensus’ expectations, respectively. The variance was mainly attributed to higherthan-expected tax expense. The effective tax rate in 4QFY23 was 49.2% (4QFY22: 34.7%), much higher than statutory tax rate mainly due to expenses, which were non-deductible for tax purposes.

• The board proposed a single tier interim dividend of 2.0sen/share for 4QFY23 (4QFY22: 5.0sen/share), bringing the YTD DPS to 5.0sen/share (FY22: 8.0sen/share).

• YoY, Beshom’s FY23 group revenue declined by 16.9%, reflective of poor performance in MLM division owing to weak consumer confident. In tandem with the group’s topline decrease, FY23 core earnings fell by 49.1% YoY.

• MLM. The segmental quarterly revenue saw an improvement of 15.8% QoQ, thanks to higher sales of affordable goods driven by Hari Raya promotion and overseas incentive trip campaign. As a result, segmental EBIT improved more than 10 times QoQ to RM2.7mn compared with RM0.2mn in 3QFY23.

• Wholesale. Due to high base effect in the preceding quarter on the back of higher seasonal CNY sales, the division’s revenue and EBIT declined by 5.4% QoQ and 30.0% QoQ to RM14.5mn and RM1.3mn respectively in the current quarter.

• Retail. The division’s quarterly revenue plunged 38.7% QoQ to RM7.9mn, owing to the reduced spending post-CNY and heightened inflationary pressure. Driven by revenue decline and elevated operating expenses (electricity tariff hike and Employment Act), the segmental EBIT tumbled 95.7% QoQ to RM0.1mn in 4QFY23 compared with RM1.5mn in 3QFY23. Note that the segmental EBIT margin plunged 10.7%-pts QoQ to 0.8% in 4QFY23.

Impact

• We cut our earnings forecasts for FY24/FY25 by 15.0%/19.6% respectively to reflect our view on the group’s challenging outlook. Meanwhile, we also introduce our FY26 forecast.

Outlook

• MLM. Despite registering improved performance compared with the immediate preceding quarter, we believe the segment continues to face challenges from elevated inflationary pressure and dampened consumer sentiment. We expect the division’s sales to be flat or lower QoQ in the coming quarter due to the absence of Hari Raya promotion.

• Wholesale. We anticipate the division will record QoQ sales growth in the coming quarter as it undertakes rebranding exercise and roll out new products.

• Retail. Sales for the segment normalised as expected post-CNY festive season. We expect segmental sales to be flat QoQ and margin compression to be persistent from higher operating expenses (staff cost and electricity).

Valuation

• Maintain Sell with a lower target price of RM0.96/share (previously RM1.11/share) based on 11x CY24 EPS.

Source: TA Research - 26 Jun 2023