Review

• Beshom Holdings Bhd’s (BESHOM) 9MFY24 core earnings of RM7.7mn came in at 64.0% of ours and consensus’ full-year forecasts. We deemed the results within expectations as we are expecting a stronger 4QFY24 performance.

• 9MFY24 EBIT and revenue declined by 43.1% YoY and 14.8% YoY to RM10.7mn and RM115.2mn, respectively. The weaker performance was dragged by all segments.

• MLM. MLM’s EBIT for 9MFY24 plunged 80.1% YoY to RM1.1mn, in tandem with a decline in revenue of 29.4% YoY to RM39.1mn. The weaker result was mainly due to poor market sentiment in domestic economy, which resulted in cautious spending, especially on non-essential goods. This is exacerbated by stiff competition from other MLM market players.

• Wholesale. The segmental revenue improved by 2.6% YoY to RM46.3mn driven by the higher demand for premium patented medicine and improved sales of goods to duty-free shop. However, the 9MFY24 EBIT decreased to RM7.5mn (-19.8% YoY), primarily due to the high base effect in previous corresponding year.

• Retail. For 9MFY24, the retail segment posted revenue of RM25.7mn (- 17.5% YoY) mainly due to subdued demand for health-supplements products following the normalcy of Covid-19. 9MFY24’s EBIT tumbled 84.7% YoY to RM0.4mn caused by an increase in staff cost coupled with lower revenue.

Impact

• No change to our earnings forecasts.

Outlook

• MLM. Management remains cautious on the market outlook (increase in SST to 8% and weakening of RM against the major currencies), which would dampen the spending power. However, we expect the improved marketing initiatives would increase its members’ performance and retention rate.

• Wholesale. Beshom plans to promote its key products by offering overseas trips as incentives to its customers. Additionally, we believe that robust tourist arrivals will boost its sales of goods to duty free shop in the upcoming quarter.

• Retail. We anticipate the retail division will mark an improvement on its top line for 4QFY24 with the roll out of a year-end loyalty members’ sales campaign specifically targeting loyalty members.

Valuation

• We maintain SELL on Beshom with an unchanged TP of RM0.80/share, based on 15x CY24 EPS.

Source: TA Research - 27 Mar 2024