How Profitable Are The Different Businesses Of Best World International Limited?

Best World International Limited (SGX: 5ER) is a direct-selling company that deals with a wide range of healthcare products. The company has a direct selling network in 12 markets across Asia, including Singapore, Taiwan, Indonesia, Malaysia, and more.

The biggest geographical market for Best World would be Taiwan, which accounted for over 61.3% of the company’s total revenue in 2016. China was second at 28.8%.

Best World has three business segments, namely, Direct Selling, Export, and Manufacturing/Wholesale. To better understand the business, I looked deeper into some numbers to understand the profitability of each of Best World’s business segments.

More specifically, I want to understand how well each segment is doing when it comes to making a profit on each dollar of Best World’s equity that they employ. In other words, I want to calculate the return on equity for each segment. (The return on equity is found by dividing each segment’s profit by its net assets, or equity.)

The table below shows the pre-tax profit, equity, and return on equity for each of Best World’s business segments in 2016:

Source: Best World 2016 annual report                                 

The most profitable segment in 2016 was the Export segment, which focuses primarily on the sale of products to China. The next most profitable segment was Direct Selling, which derived most of its income from Taiwan in 2016.

What’s interesting to note is that the Export segment was also the fastest growing segment for Best World in 2016. Its profit before tax and revenue jumped by 239% and 273%, respectively, during the year. In 2017, the Export segment has continued to grow – its revenue was up 80.9% year-on-year in the first nine months of 2017.

Going forward, it will be useful for investors to pay attention to the China market, given that it is home to the company’s fastest-growing business segment.

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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.