Latest Earnings from Best World International Limited: What’s Next After A 273% Jump In Profit?

Best World International Limited  (SGX: 5ER) reported its fiscal second-quarter earnings on Thursday evening. The reporting period was from 1 April 2016 to 30 June 2016.

As a brief introduction, Best World is a direct-selling company that deals with a wide range of healthcare products. The firm currently has operations in 12 markets in Asia.

The biggest geographical source of revenue for Best World would be Taiwan, which accounted for over 63.7% of total revenue in the first-half of 2016. China is second at 25.8%. Recently, it was also awarded a Direct Selling License in China which will become effective before the end of 2016. Best World’s China business is currently export-driven.

With these, let’s look at how Best World fared in its reporting quarter.

Financial highlights

Here are some of the company’s latest financial figures:

  1. Total revenue surged by 145.2% year-on-year to S$51.6 million, underpinned by strong growth from the key markets of Taiwan, China and Indonesia.
  2. Consequently, net profit rocketed by 273.4% to S$7.37 million.
  3. As of 30 June 2016, Best World’ balance sheet has S$48.3 million in cash and cash equivalents and just S$2.51 million in debt. This is an improvement from a year ago when there was S$34.5 million in cash and cash equivalents and S$1.5 million in debt.
  4. Best World ended the reporting quarter with S$2.65 million in operating cash flow and S$0.28 million in capital expenditure. This gave rise to S$2.37 million in free cash flow (operating cash flow minus capital expenditures). A year ago, Best World had free cash flow of a negative S$1.1 million.
  5. Best World reported 421,208 members as of 30 June 2016, an increase of 2% from the last sequential quarter and 12.3% from a year ago.

To sum it up, Best World had achieved growth in revenue, profit, cash flow, as well as its membership base. The company also managed to strengthen its balance sheet.

Best World’s board of directors had recommended an interim dividend of S$0.02 per share for the reporting quarter, four times higher than the S$0.005 per share seen a year ago.

The road ahead

Dr. Doreen Tan, Best World’s co-chairman and president, had given some insights in the earnings release on the company’s growth plans:

We shall continue to drive both top and bottom line growth through consistent improvements in our operations and offer more products & services in our key markets. For the other markets, we shall also step up our marketing efforts to improve our performance.

In addition, to achieve better control over inventory lead time, product quality and to cater to the anticipated increasing demands from our skin care line, we are in the process of setting up a state-of art skin care manufacturing facility in Tuas, slated to be completed in 3Q2017.”

Dr. Dora Hoan, the company’s chief executive, had some words to add on the topic too:

“Looking ahead, the approval of our direct selling license in China marks another exciting chapter for the Group.

Leveraging on our proven business model and management experience in the market, we are confident to be able to tap into the mammoth market potential of China, setting the stage for further growth for at least the next five years.”

The company has also proposed a bonus issue of one new share for every four existing shares. Best World cited three reasons for the bonus issue:

“The bonus issue will increase the issued share capital base of the Company to reflect the growth and expansion of the Group’s business as well as encourage a wider spread of shareholders and increase market trading interest.”

Best World’s shares last changed hands at S$1.555 each yesterday. Based on that price, it is trading at 16.3 times trailing earnings.

For more investing insights and to keep up to date on the latest financial and stock market news, you can sign up now for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo owns shares in Best World International.