Review

• Beshom Holdings Bhd (BESHOM)’s 1QFY25 results accounted for 14% and 15% of ours and consensus’ full year estimates, respectively. We deemed the results to be within expectation as we expect stronger festivities sales in 2HFY25 and improved cost management going forward.

• Core earnings remained flat at RM2.6mn, while quarterly revenue declined by 4.9% YoY to RM33.5mn. The weaker overall performance was mainly dragged by the underperformance of the wholesale division, which offset the improved results from the MLM and retail segments.

• Wholesale. Segmental revenue dipped by 20.3% YoY to RM11.4mn, primarily due to lower sales of vintage tea and Chinese medicated tonic products. Meanwhile, EBIT declined by 82.2% YoY to RM0.4mn, mainly due to higher input and logistics costs, along with lower sales in 1QFY25. As a result, the EBIT margin contracted by 11.2%-pts YoY to 3.2%.

• MLM. EBIT more than doubled to RM1.3mn (+283.4% YoY), while revenue increased by 3.7% YoY to RM12.9mn. The better results were primarily driven by a reduction in rebates/promotions, leading to a 7.6%- pts YoY increase in EBIT margin to 10.4%. Additionally, the PB Thera series range of products (big-ticket items) saw higher sales during 1QFY25.

• Retail. LBIT narrowed to RM0.3mn from RM0.4mn a year ago, driven by higher revenue of RM7.6mn (+8.7% YoY) posted in 1QFY25. The improved sales were largely attributed to higher contributions from its house brand products and spillover contributions from the members' sales campaign (held from 24th April 2024 to 5th May 2024) in 4QFY24

• No dividend was declared for the quarter under review.

Impact

• Maintain our earnings estimates for FY25-27F.

Outlook

• Management will continue to focus on effective marketing strategies and attractive ABO incentive payouts to boost its topline. Hence, we expect Beshom’s FY25F revenue to grow by 12.5% YoY to RM169.7mn. With restrategised promotional campaign and improved cost-control, we believe the group would be able to strengthen its bottom line going forward.

• The group successfully declared a dividend of 3.0sen/share despite its weakened performance in FY24. Looking ahead, we maintain our dividend forecast of 3.0sen/share for FY25F, supported by the group’s strong net cash position of RM135.6mn.

Valuation

• We valued Beshom at an unchanged TP of RM0.96/share by using a 15x PER. We upgraded the stock from Sell to Hold due to the recent decline in share price.

Source: TA Research - 30 Sept 2024