Asked on 16 Apr 2019
Discuss anything about share price, dividends, yield, ratios, fundamentals, technical analysis and if you would buy or sell this stock on the SGX Singapore markets. Do take note that the answers given by our members are just your opinions, so please do your own due diligence before making an investment!
TL;DR Strong business model which possesses strong brand equity. Historical financials look very strong with excellent profitability, balance sheet strength and cashflow management.
Founded in 1990, Best World International is a Singapore headquartered company which specialises in the development and distribution of premium skincare, personal care, nutritional and wellness products with operations in 11 markets in Asia and the Middle East.
Revenue had increased YOY by 24% to 266m in FY18. Gross Profit increased significantly by 41.6% to 207m due to higher revenue with reduced cost of sales. Because of this increased profitability, profit before tax was significantly higher by 37.5% to 83m.
Current Ratio is more than 2, which shows that the firm has a strong short-term liquidity profile. Moreover, most of current assets are cash, which reduces liquidity risk, but could signify that additional cash could be reinvested into the firm. Leverage (D/E) for the firm is very small as well, which reduces the risks of defaults and could signify lower cost of borrowing in the future. Due to low amounts of debt, the interest coverage ratio is exceedingly high. Overall, the businesses debt profile seems very healthy.
Cashflow from operating activities was significantly higher due to significantly higher profit after tax and significant improvements in working capital management by collecting receivables and extending payables.
Cashflow from investing activities was lesser due to lesser purchase in financial assets.
Cashflow from financing activities experienced a large increase outflow due to higher dividends (50% increase) being paid out.
The practice of exaggerating how a good product is may lead to regulatory intervention. Since most of the distributors operate independently, monitoring them will be a significant challenge. Proper training programmes and mentorship by BestWorld could help to mitigate this.
Since direct selling requires special licensing in many countries, changes in regulation could have widespread effects which may lead to decreased earnings.
BW provides strong brand image, especially through Mainboard listing and large appeal to the masses. This provides BW with a unique selling point that can drive consumer traffic and increase transactions.
Possessing a direct selling model, scaling should not increase fixed costs proportionately which can help to increase profits substantially as the number of transactions increase overtime.