Best World plunges from dizzying heights
Like a roller coaster, Best World International plunged on
Thursday by a whopping 22.9 per cent or 31.5 cents, after hitting an all-time
peak of S$1.39 on Tuesday.
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Lee Meixian
10 June 2016
Like a roller coaster, Best World International plunged on Thursday by a whopping 22.9 per cent or 31.5 cents, after hitting an all-time peak of S$1.39 on Tuesday.
This, it arrived at after a steady share price climb that accelerated from January this year.
The latest share price is still triple of what it was at the start of the year.
On the stock market, the multi-level marketing operator for healthcare and wellness products saw more than 5.4 million shares change hands, which is three times its six-month average trading volume. It was also the clear-cut "top loser" of the day.
Some say the trigger could have been a Straits Times article on Thursday which quoted a remisier Desmond Leong as saying: "I thought it would settle at S$1, then it broke S$1. I think it's a bit too fast, too soon. These sort of stocks usually scare me. Just be careful - usually stocks that are fast up come down fast as well."
Since April, the company has been queried no less than three times over its trading activity. Each time, it has maintained that it is compliant with listing rules.
On Wednesday, Best World also responded to the Singapore Exchange's (SGX) queries on its financial results in its first quarter ended March 31, 2016.
The company did extraordinarily well, with revenue jumping 160.8 per cent to S$35.2 million, while net profit grew more than 23-fold to S$6 million.
The company said its revenue growth was due to higher contribution from its key markets, namely Taiwan, China and Indonesia.
SGX asked it to give detailed explanations for the increase in revenue of the export orders from its China agent.
Best World replied that the company exports its products to China through an importing agent which distributes the products to consumers.
"The increase in revenue is as a result of increased orders from our importing agent, due to increase in demand for our products in China."
SGX also queried it on some net losses made in Q1 from forward contracts for hedging purposes, as well as how it was possible that the membership of the group's direct selling business rose, even though the group closed some of its lifestyle centres in Q1.
To the latter question, the group replied that it is looking to expand through e-commerce instead of the "obsolete" way of distributing products slowly through lifestyle centres.
The Straits Times article quoted chief operating officer Huang Ban Chin attributing the interest in the stock to recent roadshows that the company has been organising to promote itself to the local investment community and to funds in Hong Kong and China.
Still, according to Bloomberg, the company is only covered by one brokerage, CIMB.
The analyst Jonathan Seow has an "add" rating on the stock. He is bullish on the company as "a play on discretionary consumer spending in North Asia that is void of the traditional retailing pressures of rents and staff costs".
He also expects continued strong earnings momentum in Taiwan to drive near-term profits, and a direct selling licence in China in late 2016 or early 2017 to further propel the company's earnings.
The stock has already surpassed his April's target price of S$0.97.