Hot stock: Best World extends rally, up 5% at midday break

SHARES of Best World International continued their rally, adding 14 Singapore cents or 4.6 per cent to enter the Singapore bourse's midday break at S$3.18.

The counter, which averaged 1.86 million shares traded over the last 15 trading days, was also seeing comparatively heavy trading, with 2.88 million shares changing hands in the morning session. The total value of trades made on Friday morning was S$8.93 million.

The company said on Jan 31 that it expects to report its earnings for fiscal 2018 after the market closes on Feb 26.

Shares in the skincare maker and distributor gained 6 per cent within the first hour of Thursday's trading session, prompting the Singapore Exchange (SGX) to issue a query citing the unusual price movement. The counter closed on Thursday up 24 Singapore cents or 8.6 per cent at S$3.04.

In its response to the SGX after the market closed on Thursday, Best World said that it was not aware of any information not previously announced that might explain the unusual price movement. But it noted that there was an upward price movement in the firm's shares following the announcement of the expected date of release of its financial results for the nine months ended Sept 30, 2018.

It previously reported S$29.9 million in net profit for the third quarter on Nov 8, 2018. The bottom line was close to two and a half times more than earnings from the year-ago period.

The earnings jump was boosted mostly by new revenue in China, where it has moved away from an export business model to a franchise one.

Analysts were also positive on the company's growth after beating expectations for Q3 and the first nine months of fiscal 2018. 

RHB Research Institute analyst Juliana Cai said in a November 2018 report following Best World's Q3 earnings release that Q4 has historically been the company's strongest quarter seasonally. She expects Best World to generate a year-on-year improvement given the "stronger earnings profile of the new franchise model".

RHB in November maintained a "buy" call on the stock with a target price of S$2.13. Based on the midday closing price of the counter, Best World shares were trading almost 50 per cent above RHB's target price.

Meanwhile, CIMB-CGS analysts Lim Siew Khee and Cezzane See, also in a November report, said the brokerage was "too cautious on China growth previously" and Q4 earnings were likely to be an improvement.

The CIMB analysts said that forecasted Q4 earnings may be "higher quarter-on-quarter on the back of sustained sales growth in China".

CIMB had a "hold" call on Best World in its November report with a target price of S$1.90.