• Best World International’s 2Q18 earnings of S$9.1m (-24% y-o-y) below expectations.
• Growth prospects could be a challenge as revenue trends over last nine months point to weakening demand from China.
• Adoption of Franchise vs Direct Selling model for China impedes the tracking of sales against underlying consumption, which could weigh on investor sentiment.
• Maintain FULLY VALUED with lower Target Price of S$1.15; we are suspending coverage on the stock.

Maintain Fully Valued With Lower Target Price of S$1.15; 2Q18 Earnings Below Expectations

While a weaker 2Q18 has been largely anticipated as per management’s guidance, Best World’s revenue of S$35m and net profit of S$9.1m was still below expectations. After adjusting for transitionary effects, revenue trends over the last three quarters point to weakening demand from China – which suggests that the company may fall short of consensus’ expectations of 24% bottom-line growth in FY18F. 

Source: DBS Research - 08 Aug 2018