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What Caused Best World International To Go up by 1900% in 2 years!


Source Photo: Best World International, Google
Source Photo: Best World International, The Business Times Singapore

Introduction


Source Photo: Best World International

Best World International Limited develops, manufactures, and distributes skincare, personal care, nutritional, and wellness products. The company operates through Direct Selling, Export, and Manufacturing/Wholesale segments. Best World International Products are well known as one of the premium beauty and wellness product in Asia. It operates in Singapore, Thailand, Taiwan, Indonesia, Malaysia, Vietnam, Hong Kong, China, Korea, the Philippines, Myanmar, and Dubai. Best World International Limited was founded in 1990 and is headquartered in Singapore.

1. Successful shift in business model


A conversion of business model in China from an exporting model to wholesale model has led to a 145% in net profit. The reason behind it was BWL HQ sells to Best World (China) Pharmaceutical Co., Ltd. (“BWCP”), Wholly 100% Owned Subsidiary of Best World International at the transfer price for margin expansion where this will allow higher profit margins through direct selling as it eliminates the middlemen (third party agent) involved in product distribution.


2. Successful Penetration Into ChinaSegmental Revenue (SGD Mil)

As we can see from 2009 to 2013, Best World International’s revenues are not only inconsistent but also quite miserable. However, what many do not know is that during this time, their top management team is working very hard to set up operations to penetrate into the Chinese/Taiwanese market. Results are not immediate and many investors lost patience. However, in 2014 onwards, once their operations has been set up, their results speaks for itself.

Source Photo: WealthPark App (Investment Tool)

This came together with very generous dividends. This caught many investor’s decision and thus, share price shot up significantly due to a surge in demand for their shares.


3. Huge Potential In The Chinese Market


Today, Best World is a veteran in the Chinese market. They are capitalising on their knowledge in the Chinese to expand. For example, one key reason they do not sell their products on popular online selling platforms like Taobao, Tmall and JD.com, is that they understood their product’s brand could not easily grab customers from other larger brands such as SKII. Instead, they used WeChat to promote their brand experience to potential customers, thus convincing them to switch. And once switched, they aim to convert that consumer into a lifetime customer. On top of that, China’s middle class are transiting into high income level which will lead to higher spending in improving their lifestyle. China population currently stand at 1.386 billion.


4. Healthy Financial Position


Source Photo: WealthPark App (Investment Tool)

The financial position of Best World International is a very important factor to their success. When expanding into the Chinese/Taiwanese market, they generated very little profits and losses from time to time. But expenses of the business such as staff salary, factory and building maintenance needs to be paid. Therefore, it is extremely important for them to have a healthy balance sheet. As we can see before 2014, Best World hoarded so much cash that their cash ratio stood above 2.0x. A cash ratio of 2.0x means that for every $1 in liability due in 1 year, they had $2 in cash to pay them off. Having this large amount of cash allowed them to continue fighting on without worrying about their business running out of cash to run their operations.


5. Prudent Management

Best World’s top management team, Dora and Doreen are an extremely capable team. Dora is a passionate in direct selling and Doreen is very experienced in the beauty and nutrition industry. Combined, they are a formidable force to be reckoned with. Most shareholders do not pay attention when the management team displayed their capability by constantly travelling to China/Taiwan to understand their market and set up their business. They displayed grit when they constantly do it even though results are not immediate and they faced a wide array of challenges. This is what we really want when we look for management in our companies. We do not want them to merely sit on the board to conveniently earn a salary. We want them to put in huge amount of effort to strengthen the business’s competitive advantage. On top of that, we want them to also reward loyal shareholders which is what they have done after the business successfully turned around. As profits shot up, they shared these profits with shareholders in the form of dividends. Last year, they even set up a 40% dividend policy. As an added bonus, they are founders of them business themselves. This caused them to have more commitment to growing the business.

Disclaimer: All facts and opinions presented are for educational purposes only. This is not a recommendation to buy or to sell. The author involved in the writing of this message has no vested interest in the companies. Please consult a professional for expert financial or other assistance or legal advice.

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