Best World International Limited

Best World share price has gone from $0.335 at the beginning of the year to $1.5 today (4 July). An investment of 10k then would give you 45k now. To sell or not to sell is the question that would pop up in many of our mind.

In theory, the price purchased should not matter in the sell decision. A sell decision should be based on one or more of the following reasons.

a. The fundamentals of the company has deteriorate

b. The company is overvalue at the current price

c. To raise cash for a better buying idea

d. To raise cash for other reasons

For Best World, its fundamentals definitely has gone better with the award of its China DS License. Annualising 2016 1Q results, 2016 PE at $1.5 will be approximately 14. Not dirt cheap but definitely not expensive, given its growth in the coming years. At the moment, I do not have any better idea. Last but not least, other reasons which for me is my recent decision to pay off my remaining car loan.

Again, in theory I should sell off my other holdings since BWL has such huge potential. However, I succumbed to my emotion and sold a third of my BWL holdings to take some profits due to its quick gain. Will hold on to the remaining shares to participate in the company's growth in the coming years.

Business

Back to its business, Best World International Limited (BWL) is a direct selling company that sells health supplement, skin care and lifestyle products. Its key products are Avance range of health supplements and DR's Secret skin care products. 

Listed in 2004, it had shown tremendous growth till 2008. From 2009 onwards, its revenue, net profit and dividend shrank and was flat between 2010 to 2013. The growth and then subsequent challenging years was due to over-reliance on Indonesia market. The regulatory change in Indonesia that revoked some of BWL products' license caused the huge drop in both its top and bottom lines. 

During these trying period, the company worked on other markets and establishing its China market.  The acquisition of China manufacturing plant in 2014 allowed them to fulfil the final criteria in its application for DS licence. In the same period, its Taiwan market grew and on their own estimation, the company felt that they are the number 13th/14th company in Taiwan in 2015. They reckoned that they will be 8th/9th this year. While waiting to get their DS licence, BWL sold their products to China through export model which also see a tremendous growth last year and 2016 1Q. All these recent developments augur well for the company and they should have good growth in the next few years.

Crunching the numbers












As seen from the data, this is a cash business. As long as the company can grow their top line, its FCF will mirror or be higher than its NP. The company has a dividend policy of at least 30%. So again, if NP grow, its dividend will continue to grow.

Management
Having heard the COO spoke during an investment seminar, I would say that the management know what they are doing. Together, they hold more than half the shares, so their interest will be aligned with the rest of the share holders.

My Take

Having gone through and survive a challenging period, I am confident that the management has learned much from the episode and is ready to bring the company to the next growth of phase.

I will hold on to my current holdings to participate in the company's growth. I might look at accumulating the shares when and if the current euphoria is over, resulting a lower share price.