BEST Inc

BEST Inc (NASDAQ: BEST) is a supply chain entity that provides a New Retail platform to offer solutions related to supply chain management, merchandise sourcing, freight, and cross-border supply.

Investment Rationale – SPECULATIVE BUY at USD 1.36

• Despite the Covid-19 pandemic, the Company solidified its leading position in the freight market and gained market share in the Southeast Asian market.
• BEST continued improving network stability, optimizing product structure, enhancing service quality, and improving underlying financials to position itself for long-term success.
• The lucrative growth prospects of the e-commerce market can boost the Company’s logistic services and supply chain solutions.
• From a technical standpoint, the stock price is hovering close to a lower standard deviation. Meanwhile, 14-day RSI (34.86) also indicates an oversold signal.
• Over the past three years (FY17 to FY20), revenue has surged at a CAGR of 14.48%.

Risk Assessments

• It is a loss-making entity that can face a liquidity crunch amid macroeconomic uncertainties.
• The growth trajectory of certain business units depends on its ability to raise external financing.
• The stock price has shown a declining price trend and plunged around 73% in the past year which raises doubt over the Company’s merits. Moreover, it is penny stock that is prone to volatile movement.

Recent News

12 March 2021: BEST disposed of its assets worth RMB517 million to Sinolink Yongfu Asset Management for reinforcing its liquidity. 

Financial Highlights for the quarterly period ended 31 March 2021 (as on 8 June 2021)

   (Source: Company Website)

• During Q1 FY21, BEST’s financial results demonstrated a mix of ongoing trading challenges and strategic execution of refocusing plants.
• The Group achieved top-line growth in Freight, Supply Chain Management and Global divisions with strong gross margin.
• Revenue surged by 29.9% year-on-year, while there was an improvement in gross loss margins by 1.8 percentage points.
• The Group remained in net losses, albeit losses were slightly reduced.
• As of 31 March 2021, the Company reported liquid assets of RMB3,976.8 million in terms of cash and cash equivalents, restricted cash, and short-term investments. The position was slightly reduced from FY20 end due to net cash used in operating activities.

Share Price Chart    

 (Analysis done by Kalkine Group)

Conclusion

BEST has certainly shown a top-line growth and margin improvement during Q1 FY21. The Company has taken initiatives for Express division to improve the bottom-line with cost reduction. It is also exploring financing options to strengthen certain business units. In terms of guidance based on current market conditions, the Group expects to report FY21 revenue in the range of RMB34 billion and RMB36 billion. The stock made a 52 week High and Low of USD 5.23 and USD 1.11, respectively. On the technical chart, the next important support level is at USD 1.12.

Based on the top-line growth, strategic refocusing plan, oversold technical signal, margin improvements, bright long-term industry prospects, we have given a "SPECULATIVE BUY" stance on BEST Inc at the closing market price of USD 1.36 (as of 10 June 2021).  

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).