Best World International Ltd. – Value Analysis (SINGAPORE:CGN) : August 25, 2017

Capitalcube gives Best World International Ltd. a score of 94.

Our analysis is based on comparing Best World International Ltd. with the following peers – Unitech Computer Co., Ltd., Nippon Shikizai, Inc. and Fortune Information System Corp. (2414-TW, 4920-JP and 2468-TW).

Investment Outlook

Best World International Ltd. has a fundamental score of 94 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It currently trades at a Price/Book ratio of (6.44).
  • CGN-SG‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • CGN-SG has a successful operating model with relatively high net profit margins and asset turns.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • CGN-SG‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While CGN-SG‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • CGN-SG has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

CGN-SG has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 0.82% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 8.23%), and a well-cushioned interest coverage level of 516.44x, CGN-SG can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 3 chosen peers for the company, only 2 of the stocks have an outstanding debt balance. Companies with no debt include 2468-TW.

CGN-SG has maintained its Quick & Able profile from the recent year-end.

  • CGN-SG‘s interest coverage has declined 205.43 points from last year’s high but remains above its five-year average interest coverage of 298.28.
  • The decrease in its interest coverage to 516.44x from 721.86x (in 2016) was also accompanied by a decrease in its peer median during this period to 275.48x from 376.40x.
  • Interest coverage fell 104.50 points relative to peers.
  • CGN-SG‘s debt-EV is less than (but within one standard deviation of) its five-year average debt-EV of 20.81%.
  • Like the interest coverage trend, the decrease in its debt-EV (to 0.82% from 2.38%) was also accompanied by a decrease in its peer median during this period (to 8.23% from 13.27%).
  • Relative to peers, debt-EV rose 3.48 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Unitech Computer Co., Ltd. 15.64 1.79 34.52 47.21
Nippon Shikizai, Inc. 51.92 1.01 11.31 19.11
Fortune Information System Corp. 0 3.32 3348 999
Best World International Limited 0.82 2.35 516.44 920.31
Peer Median 8.23 2.07 275.48 483.76
Best In Class 0.82 3.32 3348 999

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Company Profile

Best World International Ltd. is an investment holding company, which engages in the distribution of nutritional supplement products, personal care products and healthcare equipment. The firm specializes in the developing and marketing premium quality skincare, personal care, nutritional and wellness, and health and lifestyle products. It operates through the following segments: Direct Selling, Export Sales, and Manufacturing and Wholesale. The Direct Selling segment comprises of sales to customers through direct selling channels in Singapore, Malaysia, Indonesia, Thailand, Taiwan, Hong Kong, Vietnam, Myanmar, Philippines, Korea and Australia. The Export Sales segment handles sales to retail customers at export retail price through retailers. The Manufacturing and Wholesale segment consists of sales to customers through wholesale channel. The company was founded by Beng Mui Hoan and Nee Moi Tan on December 11, 1990 and is headquartered in Singapore.

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