SINGAPORE (Nov 7): CIMB is reiterating its “add” call on Best World with a higher target price of $2.21 from $2.05 previously, after the direct-selling company posted 3Q earnings of $8.9 million, which was more than double from a year ago.

(See also: Best World’s 3Q earnings more than double to $8.9 mil)

In a Friday report, analyst Jonathan Seow notes the group’s “stellar” net profit is mainly due to the “star markets” of Taiwan and China. This has resulted in CIMB lifting its FY16 EPS forecast mostly on better-than-expected sales in China.

“Earnings growth will mostly come from penetration into China and full conversion to a direct-selling model,” says the analyst, noting the group’s completion of its verification process of the requisite nine service centres in Hangzhou city.

“Best World’s biggest market, Taiwan, is also poised for growth, backed by a growing membership base. Indonesia has also done well and could surprise positively – although it is still currently a small contributor,” he notes.  

Despite the q-o-q drop in Taiwan sales by 21%, Seow believes it is “not a concern” as he thinks Best World’s management intentionally withheld major promotions in the quarter in anticipation of anniversary promotions and celebrations in 4Q.  

The analyst says FY16F will be a record year as 9M16 net profit has already exceeded FY15’s $10 million.

“We believe that FY17F will again prove to be another record year,” adds Seow.

As at 11:30am, shares of Best World are trading 4.35% higher at $1.56.