Review

• Beshom Holdings Bhd (BESHOM)’s 4QFY24 results came in within ours and consensus’ estimates. Despite an 8.7% YoY decrease in revenue, the core net profit surged by 41.3% YoY to RM3.8mn.

• Cumulatively, FY24 core earnings of RM11.5mn accounted for 95% and 102% of ours and consensus’ full-year forecasts.

• FY24 core net profit dropped by 20.4% YoY, in tandem with decreased in revenue by 13.4% YoY. The weaker performance was mainly dragged by all segments, especially MLM and retail business.

• MLM. MLM’s EBIT for FY24 plunged 83.3% YoY to RM1.3mn while revenue declined 25.9% YoY to RM52.4mn. The weaker performance was primarily due to lower sales and underperforming members. Moreover, higher marketing expenses and increased input costs further contributed to dragging down the results in FY24.

• Wholesale. The segmental revenue dropped marginally by 2.2% YoY to RM58.3mn, mainly because wholesalers rushed purchases before a price hike that took effect in FY23, leading to higher stock-up. FY24’s EBIT fell by 25.8% YoY to RM7.9mn due to lower inter-segment sales.

• Retail. In FY24, the retail segment posted revenue of RM34.7mn (-11% YoY) primarily due to subdued demand for premium house brand products. EBIT tumbled 79.4% YoY to RM0.6mn, driven by higher staff cost combined with lower revenue.

• The group declared a final single tier interim dividend of 1.5sen/share (4QFY23: 2.0sen/share), bringing the YTD dividend amounted to 3.0sen/share (vs. FY23: 5.0sen/share).

Impact

• We lowered our earnings assumptions by 1.1% and 1.0% for FY25 and FY26, respectively, after inputting the FY24 figures. We would like to take this opportunity to introduce our FY27 core net profit of RM21.7mn (+9.1%).

Outlook

• We remain cautiously optimistic on the group’s prospects, considering the potential impact of fuel subsidy rationalisation, which may exert downward pressure on the consumer spending, particularly on non-essential goods. However, the group will closely monitor operational costs and revise its marketing strategy to enhance the performance of its MLM division.

• Furthermore, the group will continue to take proactive measures to improve the in-store customer experience and enhance the effectiveness of its digital platform.

Valuation

• We valued Beshom using a 15x PER and arrived a new TP of RM0.96/share (previously: RM0.80), following the update of our valuation base year to CY25. As a result, we maintained our Sell recommendation on the stock.

Source: TA Research - 26 Jun 2024