Best World International (S$0.90) - Greater access to China Best World plans to acquire a 51% stake in Joymain, which has a direct selling licence in Jiangsu. Consideration of the acquisition is Rmb51m, of which Rmb31m will be offset by the injection of BWL Shanghai and BWL Hunan into the restructured Joymain. The partnership will allow Best World to start direct selling in Jiangsu and penetrate the local market using Joymain’s established brand name. We have lowered our FY07-09 EPS estimates to account for start-up costs related to the China expansion. As we approach end-2007, we have also rolled forward our valuation from 13.6x CY08 P/E (set at a 20% discount to STI target) to 11x CY09 P/E. Our new multiple is now pegged at a 20% discount to the average valuation for bigger direct selling peers, now that Best is competing more closely with these peers in China. Maintain Outperform, target price: S$1.22. Watch out for more acquisitions in China.
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