A recovery year ahead in FY23F
? FY4/22 core net profit of RM27.2m (-30% yoy) was below our expectations
due to weaker-than-expected results from its MLM division.
? We believe recovery prospects in FY23F are intact, driven by i) aggressive
recruitment activities, ii) better product mix, and iii) effective sales campaigns.
? Reiterate Add with an unchanged TP of RM1.93 (11.1x CY23F P/E).
4QFY4/22 core net profit declined 52.5% yoy to RM4.5m
Beshom Holdings Bhd’s (Beshom) 4QFY4/22 revenue fell 32.2% yoy, mainly due to i) an
Omicron wave from mid-Feb 22 onwards and the Ramadan fasting month in Apr 22,
which dampened multi-level marketing (MLM) member recruitment and renewal activities,
ii) lower retail footfall, and iii) seasonally lower wholesale division sales for its Chinese
medicated tonic and cooking wine post Chinese New Year (CNY) promotions. 4Q22
EBITDA margin dipped to 20.5% (-0.8% pts yoy) due to lower economies of scale and a
less favourable margin mix. After stripping out one-off gains from disposal of its vintage
tea business (RM2.3m), 4Q22 core net profit (CNP) slumped 52.5% yoy to RM4.5m.
FY4/22 CNP dipped 30% yoy to RM27.2m, below expectations
FY4/22 revenue declined 22.8% yoy, owing to lower sales from its MLM (-33.1% yoy) and
wholesale division (-9.3% yoy), albeit mitigated by higher retail segment sales (+3.2%
yoy). As a result, FY22 CNP was below our expectations, at 92% of our FY22 forecast.
The underperformance was mainly due to restrictive movement measures and
resurgence of the Omicron wave, postponing most of its physical mega events and sales
campaigns during FY22 and resulting in fewer new recruits and renewals. Nonetheless,
its GP margin improved to 41.2% (+2.4% pts yoy) on better margin mix and product price
hikes for its wholesale products, indicating strong pricing power. Beshom declared a final
dividend of 5 sen; full year is 8 sen (84% payout), within our expectations.
Expecting a recovery from FY23F onwards
We believe recovery prospects for Beshom’s MLM segment, a key lever for its
profitability, are intact in FY23F. This is driven by i) resumption of aggressive recruitment
activities through physical events and attractive incentive schemes post removal of
movement restrictions, ii) margin expansion on better product mix and product price
hikes, iii) its grand 30th MLM anniversary celebration spurring members’ spending via
attractive end-rewards, and iv) introduction of easy payment schemes and BNPL options.
Reiterate Add with an unchanged TP of RM1.93
We retain our Add call and TP of RM1.93 (11.1x CY23F P/E, 1.5 s.d. below its 5-year
mean P/E of 19.2x) and introduce our FY25 estimates. We like Beshom for its i)
appealing dividend yield of 8% (FY23-25F), and ii) attractive valuation (currently trading
at 8.6x CY23F P/E, a discount of 44% to the MLM sector’s 5-year mean P/E of 15.4x). A
strong recovery in MLM membership is a key re-rating catalyst. Downside risks: weakerthan-expected recovery in agent count and slowdown in direct sales.