Brokers' Take

Best World International, June 30 close: 34.5 cents

01 July 2005
The Business Times

Philip Securities Research, June 30

WE expect the company to benefit from the region's booming consumer industry with its well-established multi-level network marketing. The direct selling business model enables Best World to penetrate new markets with minimal invested capital and maximum results as demonstrated by its buoyant growth.

The success of Best World hugely lies in its direct selling model known as ENP, which accords benefits and bonuses to ENP members according to the sales volume generated by each member and his downlines within a specific time period. This reward system enables the business to expand rapidly and with minimal capital requirement.

We believe that earnings growth will be driven by increase in membership, especially from Thailand and Indonesia, development of new products as well as establishment of more lifestyle centres.

To date, Best World has been successful in growing its sales, which surged from a mere $7.6 million in FY2001 to $31 million in FY2004, representing compounded annual growth rate of 60 per cent.

The possible liberalisation of the China market to direct selling is a wild card that could propel further growth. The company is actively exploring a joint venture with US-based Advanced Nutritional Technology into China.

We forecast net profit after tax growth of 44 per cent in FY05, which appears conservative given that our estimate for its active member base is lower than management targets. Our 12-month price target of 43.5 cents is based on nine times FY05 PE. We initiate coverage with a 'buy'. BUY

Compiled by JOYCE KOH