Invest Positively

TIMING is everything in the stock market - or so, it goes. Based on Singapore-listed Yangzijiang Shipbuilding's two encounters with stock turbulence - last month and five years ago - and how it took charge of the situations rather differently, we can also surmise these - bad news travels fast, good news comes early and delayed reaction can cost you. When Yangzijiang's shares tumbled over 10 per cent in mid-2014 after which trading was halted amid allegations of misdeeds by a Shenzhen-listed railway firm against the shipbuilder's founder, controlling owner and executive chairman Ren Yuanlin, a clarification was shot out within two days. The China-listed firm's incumbent board had alleged the misdeeds as it was resisting Mr Ren's attempt to reconstruct the board after he emerged as largest shareholder. Mr Ren quashed the charges and in fact, had earlier confidentially submitted his rebuttals to the Shenzhen Stock Exchange - said Yangzijiang in response ...

Liquidity is a valued virtue for investors. In 2008, I was enamoured of a company that was liquid in every sense. China Milk, a Singapore-listed Chinese company (known as an S-Chip), was the principal producer of pedigree bull semen and cow embryos. China's appetite for protein meant that milk consumption was surging. The volume of milk consumed there was just one-20th that of the United States', but China's GDP per capita was a 10th that of the US'. Based in the fertile north-western province of Heilongjiang, China Milk had a vice-like grip on the source of China's milk boom: It had the rare licence to sell pedigree bull semen. The productivity of Canadian cows is four times that of Chinese cows. By importing pedigree bull semen from Canada's prized Holsteins, China Milk aimed to turbocharge the country's milk productivity. With the company well-entrenched through a network of distributors, its sales tripled from FY15 to FY18. Chin...

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...

Best World International is hiring an independent reviewer to scrutinise its business and accounting practices, after The Business Times raised concerns last week over the challenges in tracking sales of its DR's Secret line of premium skincare products in China. In a statement on Saturday, the company told shareholders that 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”. Until last week, shares of Best World had been on a multi-year rally, driven by strong growth in China. The group derives 66 per cent of total revenue from sales of the DR’s Secret line of premium skincare products in China under its franchise model. Revenue is booked when the franchisees in China purchase inventory from Best World. At least one analyst has pointed to challenges reconciling between upfront sales figures and underlying consumer demand in ...

Best World International shares have soared 171 per cent over the past 12 months, driven by strong growth in China, where the group derives 66 per cent of total revenue from sales of the DR's Secret line of premium skincare products. However, it is challenging to figure out just how and where those sales are taking place, according to new findings by The Business Times. Analysts who engage in fundamental analysis to evaluate the stock's intrinsic value have found key data hard to find or verify. At least one research house has given up tracking the stock. In August 2018, DBS Group Research analyst Carmen Tay wrote: "Given challenges in reconciling between upfront sales figures and underlying consumer demand in China, which have yet to be addressed under the new franchise model, we will suspend coverage for now." Let's leave aside the upfront sales issue for now and back up a moment. Best World has direct selling operations in most markets...

Best World International has begun to see the benefits of changing its business model in China, and is making positive progress in other key markets, the company's chief operating officer told The Business Times. Those comments came as shares of the skincare maker and distributor reached a record high on Friday to extend a months-long run. On the stock market, the counter added seven Singapore cents or 2.8 per cent to S$2.59, as more than 3.3 million shares traded hands. The stock has risen 97 per cent year-to-date, nearly doubling in value. "I guess it's got to do with the fundamentals," Best World's Huang Ban Chin said in a phone interview. "We don't really pay too much attention to the share price but I believe it's because we have commenced our franchise business model which is a replacement for our previous export model (in China)." He said that the company's third-quarter net profit of S$29.9 million - a 145 per ce...

Midas Holdings, once a billion-dollar company with a promising future in China's booming rail sector, may join the list of insolvent companies as it falls victim to alleged fraud and misdeeds overseas, leaving minority shareholders in Singapore to pay the price and cry out in desperation for accountability. Listed on Feb 23, 2004 on the Singapore Exchange (SGX) and on the Stock Exchange of Hong Kong (SEHK) on Oct 6, 2010 in a secondary listing, Midas was once favoured as a leading manufacturer of aluminium alloy extrusion products for China's rail transportation sector. At one point, JP Morgan had an almost-8 per cent stake in the company. It is unclear if it still owns Midas shares. But things took a quick turn for the company, now struggling with law suits filed in China over unauthorised loans by its former chairman Chen Wei Ping, and guarantees involving its Chinese subsidiaries. Mr Chen, now under probe by China's Economic Crime Investigation Unit for frau...

Unbeknown to the company, the former executive chairman of troubled railway parts maker Midas Holdings had been under investigation by China's Economic Crime Investigation Unit before his resignation, Midas said on Tuesday. In an exchange filing, the Midas board said it had learnt that two banks in China's Jilin province had advised Midas subsidiary Jilin Midas Light Alloy (JMLA) that the police had paid visits to their branches to investigate Chen Wei Ping. The police were from the Economic Crime Investigation Unit and Mr Chen is suspected for fraud relating to certain loans, the board said. JMLA's two banks - China Development Bank and the Export-Import Bank of China in Jilin - also made requests to JMLA to provide them with explanations within five days from March 30. In a letter dated March 30, the banks had sought information on JMLA's repayment plans for past due loans, Mr Chen's involvement in certain loans, and the financial and operational...

The board of directors of railway parts maker Midas Holdings has filed a police report against Midas subsidiary Jilin Midas Light Alloy (JMLA) in China after checks on its cash balances threw up alarming discrepancies. The board said on Monday that based on statements obtained over the counter at the Changchun branch of China Merchants Bank, JMLA had just 11,485.40 yuan (S$2,400) in its cash balance at the end of December. This is a shortfall of more than 334 million yuan from the sum that it had originally reported. Earlier, Midas's auditors had received a "bank confirmation" that JMLA had unaudited cash balances of 334.4 million yuan at its primary accounts at the end of December. The discrepancies in JMLA's accounts uncovered by the board date as far back as Dec 31, 2016, when the shortfall between the statements obtained and the earlier "bank confirmation" amounted to more than 352 million yuan. "In view of the discrepancies, t...

Three years after Peter Koh stepped in to helm the troubled abalone producer, Oceanus Group is on its way out of storm-tossed waters. The group chief executive has made good on his plan when he joined in end-2014 to cut costs, clean up the balance sheet and grow the company's profits by end 2017. For its financial year ended Dec 31, Oceanus turned its first net profit attributable to shareholders in five years, of 176 million yuan (S$36.8 million). It is in a positive net cash position, of 114 million yuan, for the first time in seven years. Mr Koh said that it was a feat he could not have imagined, just a few years ago, when there were doubts that the debt-laden, loss-making company could go on. Troubled seas Before the turn of the decade, Oceanus - which listed here in 2002 - boomed thanks to China's rise, with its counter hitting its record high in 2009 at 41.6 Singapore cents. But in 2011, millions of abalones died as a result of a lack of food and ...

To succeed at a Chinese company, aim for unrealistic targets; be courageous in a new businesses; create as many new roles as needed; and aggressively go after market share. Over the past decade and a half, I’ve advised many expatriate executives working for multinational companies in China. I have also advised Chinese executives working for local companies in the country. But increasingly, I am finding myself counselling foreign executives working for Chinese bosses at Chinese companies. Most of these are privately-held Chinese companies, often founded and operated by an entrepreneurial Chairman. One thing I’ve observed among the multinational executives that I’ve worked with is just how unprepared they are to deal with the many nuances of how Chinese companies really work. Companies are constantly revisiting their business plans and projections. It’s an environment that rewards quick decisions and the agility to grab opportunities before the competition gets there fir...

High-risk, high-return, yet state-protected products have warped prices and bred complacency Retired Shanghai truck driver Shen Xipei shunned risky stocks and low-yielding deposits and instead put his life savings into a wealth management product (WMP) sold - and guaranteed - by a bank. Soon, however, investors such as Mr Shen may start switching into other assets after Beijing published draft guidelines on Nov 17 to ban financial institutions from guaranteeing investors against losses, tightening supervision of what the central bank says is a US$9 trillion asset management industry. A move away from bank WMPs by armies of Chinese investors - which some analysts expect - would likely trigger a seismic shift in China's asset management industry, with the new rules apparently favouring transparent mutual fund products. "I bought the WMP because I trust banks. They don't run away with your money," said 63-year-old Mr Shen. The product he bought fro...

Jack Ma, who launched China's largest e-commerce company two decades ago and rode it to a US$47.6 billion fortune, turns out to have created billions of dollars of wealth for at least 10 others - a total of almost US$100 billion. By investing directly in or partnering with companies that provide services for his online buying platforms - from payment systems to delivery companies - Mr Ma and his Alibaba Group Holding Ltd have minted a network of people whose combined fortunes total more than US$52 billion, according to the Bloomberg Billionaires Index. With Mr Ma's wealth included, the collective net worth is larger than the economies of 136 countries. "Jack is a long-term visionary," said Duncan Clark, author of the book "Alibaba: The House That Jack Ma Built" and an early adviser to the company. The network of companies all feeding Alibaba at the centre "is something Jack Ma envisioned and planned from a long time ago." The f...