Best World shares fall 18.45% in heavy volume as trading resumes

Best World International shares plunged 50 Singapore cents or 18.45 per cent to finish at S$2.21 on Monday after trading resumed following a halt that lasted almost five days last week.

Heavy selling ensued with some 29.5 million shares changing hands as investors mulled over Best World's rapid expansion in China, which had underpinned its high valuations.

The direct-selling company, which also sells premium skincare products to franchisees in China, said over the weekend that it will order an independent review of its business and accounting practices, after The Business Times raised questions about the lack of clarity on how its franchisees operate in China.

Best World said it has conducted its business ethically and in compliance with applicable laws, but "is not responsible for the accounting and sales records of the franchisees, who are independent third parties".

In any case, it has decided to voluntarily hire an independent reviewer to address the issues and provide additional comfort to shareholders, Best World said over the weekend.

After falling 16.6 per cent to finish at S$2.71 a week ago before trading was halted pending clarification of BT's questions, Best World shares gapped down to open at S$2.60 on Monday.

From there they touched an intra-day high of S$2.65, before swinging down as much as 25.8 per cent to a low of S$2.01 in the late morning.

As some dumped the stock while others supported it, Best World shares clawed back gains to trade range-bound for the rest of the day.

Best World will release its fourth-quarter results after trading hours on Tuesday, after which it can resume stock buy-backs.

Some are hoping for a dividend bump as management has guided that the last quarter tends to be Best World's strongest quarter. Others are cautious about the group's increasing reliance on its China operations to drive growth.

Best World does not have a licence to conduct direct selling of skincare products in China, nor does it directly conduct any sales transactions in China through online stores or social media platforms.

Customers place orders "informally" with franchisees, and arrange for delivery or pick-up of such products at BWL Lifestyle Centres, Best World clarified over the weekend.

Franchisees also distribute Best World's products through BWL Lifestyle Centres to independent third parties who operate salons, spas, beauty centres and other retail outlets, also known as "workshops", Best World said.

Management periodically visits franchisees and has contacted certain customers of franchisees for various purposes, Best World said.

Marissa Lee

26 February 2019