For Investors: A Quick Overview Of The Cost Structure Of Best World International Limited

Best World International Limited (SGX: CGN) is a direct-selling company that deals with a wide range of healthcare products. It currently has operations in 12 markets in Asia. In the middle of 2016, the company was awarded a direct-selling license in China.

The company has been a huge winner in Singapore’s stock market over the past year with its shares climbing by 178% in price. Its strong performance caught my eye and made me curious to learn more about its business.

In this article, I want to share what I learnt about Best World’s cost structure. Here’s a table showing the company’s operating costs in 2016:

Source: Best World 2016 earnings results

There are a few observations we can draw:

1. The single largest expense for Best World in 2016 would be freelance commissions of S$54.3 million. This is housed under the company’s Distribution cost category. Freelance commissions deal with the commissions Best World pays to freelancers who distribute its products.

2. 62.1% of the company’s Administrative expenses in 2016 came from employee benefits. This works out to S$22.3 million.

3. So, human resource-related costs (employee benefits and freelance commissions) account for around 75% of Best World’s combined Distribution and Administrative costs.

By understanding Best World’s cost structure, investors can gain a clearer perspective on its future profitability.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.