SINGAPORE (Oct 23): RHB Research is starting coverage of Best World at “buy” as the group changes its business model in China from export to franchise model, giving it the ability to generate higher revenue and earnings for each product unit sold.

“We expect earnings to jump at a CAGR of 21% over the next three years, which deems the current 10x FY19F earnings valuation as very compelling,” says RHB analyst Juliana Cai.

Best World is also sitting on $87 million net cash and could maintain its historical dividend payout ratio of about 40%, which should bring FY19F dividend yield to 4%.

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