PETALING JAYA: Beshom Holdings Bhd
’s multi-level marketing (MLM) segment may be affected by cautious consumer spending due to the increase in sales and services tax, plus the weakening of the ringgit against major currencies.
“Management remains cautious on the market outlook for MLM.
“However, we expect the improved marketing initiatives would increase its members’ performance and retention rate,” TA Research said in a report.
Beshom posted core earnings of RM7.7mil for the nine-month period of financial year 2024.
Revenue declined by 14.8% year-on-year on the back of weaker performance of its MLM, wholesale and retail segments.
The MLM segment’s earnings before interest and taxes for the nine-month period plunged 80.1% year-on-year in tandem with a decline in revenue of 29.4%.
“The weaker result was mainly due to poor market sentiment in domestic economy, which resulted in cautious spending, especially on non-essential goods.
“This was exacerbated by stiff competition from other MLM market players,” the research house said.
TA Research said the results were within expectations and it expects a stronger 4Q24 performance.
For its wholesale segment, it said Beshom planned to promote its key products by offering overseas trips as incentives to its customers.
“Additionally, we believe that robust tourist arrivals will boost its sales of goods to duty-free shops in the upcoming quarter.
“We also anticipate the retail division to mark an improvement on its top line for 4Q24 with the rollout of a year-end loyalty members’ sales campaign,” said the research house, which maintained a “sell” on Beshom.
TA Research kept the target price (TP) unchanged at 80 sen based on 15 times 2024 earnings per share.
Meanwhile, CGS International (CGSI) Research reiterated its “hold” recommendation on the stock with a lower TP of 93 sen from 99 sen.
This is said reflected the overall tougher operating conditions faced by the company, specifically the weaker consumer spending environment and stiffer competition in its MLM segment.
“CGSI Research’s Economics team estimates private consumption to grow at 6.5% year-on-year and we expect Beshom’s operating environment to remain challenging in the near-to-medium term,” it added.
The research firm said government stimulus measures could offer some respite.
“We believe such stimulus measures will largely target the lower and middle income groups that make up the bulk of Beshom’s customer base, providing some support to the company’s earnings in FY25 and FY26,” the research house said.
