Results announced last night.

BEST WORLD INTERNATIONAL’S revenue for FY08 declined 6% to $96.1 million while its earnings came in 20.7% lower at $10.6 million.

Notably, net earnings for 4Q dropped more than expected (80%) to $989,000.

Solid balance sheet

 

The company also incurred $2.1 million in unrealized forex exchange losses in 4Q alone. This is something that we have to seek clarification on.

Among the positives, I note that the company has improved its credit management and this has led to accounts receivable turnover decreasing from 45 days as at end-2007 to 22 days as at end-2008.

The company had no bank loan at the end of 2008 and has approximately $30.6 million in cash and cash equivalents. Hence, providing for working capital requirements, the company appears to be in a good position to continue its cash dividend payout in future.

A final and a special dividend totalling 1.0 cent per ordinary share has been proposed. Including the interim dividend of 1.2 cents, the total dividends will amount to 2.2 cents per ordinary share for FY2008.

Dora Hoan (CEO) & Doreen Tan (chairman)

For the next 12 months, I would be looking to see if the company can add a substantial number of new members to its sales force and also to evaluate how much of these members are business builders as compared to normal consumers.

China was a disappointment

Best World announced the termination of the JV with Joymain a week ago. This came as no surprise to me as the company had no updates to this JV after its initial announcement in Dec 2007.

What concerns me is whether the company will have to write down its RMB 20 million loan to Joymain.

I also wonder what the company’s China strategy now is. Does it have to do another JV to grow its China market or should it build China slowly via organic growth? The company already has nearly 3,000 members under its franchise-selling scheme in China.

Valuation: 1X PE ex-cash