Best World

Risky but a quicker (or easier) way to grow top and bottom lines? It is like saying, we should bet all in high growth Best World, because it is a quicker way to growth your portfolio. It is true if we remain lucky till divestment. 

We need to differentiate biz model in comparison. I don't think property development is comparable with service-based direct selling biz.

True, China market, as a whole is a big market. Nu Skin Mainland China biz is across 34 cities in China. Best World's China revenue, is only in the city of Hangzhou, IIRC?

(not vested)

(13-06-2016, 03:23 PM)CityFarmer Wrote: Risky but a quicker (or easier) way to grow top and bottom lines? It is like saying, we should bet all in high growth Best World, because it is a quicker way to growth your portfolio. It is true if we remain lucky till divestment. 

We need to differentiate biz model in comparison. I don't think property development is comparable with service-based direct selling biz.

True, China market, as a whole is a big market. Nu Skin Mainland China biz is across 34 cities in China. Best World's China revenue, is only in the city of Hangzhou, IIRC?

(not vested)

The risk and return profile of BWI as a business entity is not exactly the same as the risk and return profile of a stock portfolio with 100% holding in BWI.
 
Managing BWI as a business and managing a stock portfolio with 100% holding in BWI call for completely different skill sets. These include risk management and risk diversification.
 
From risk allocation perspective:
 
BWI has 12 baskets but is putting more eggs in 2 baskets.
 
The portfolio manager has only one basket with all eggs in it.
 
BWI’s MW business covers almost the whole of China.
 
Have no idea what is the geographic coverage for its China export business.
 
If a DS license could be granted, it would be for Hangzhou first.  Nu Skin, like all other license recipients, started with one license (in one city).
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The risk level of 2 out 12 baskets with most eggs, and one basket with all eggs, aren't materially different in our context.  

Anyway, I reckon your point is,  risky but OK with its risk-reward position. I respect your view, albeit very different from mine.

The risky position should be reflected in the company current valuation

(not vested)

Two interesting articles relevant to our discussions, I reckon.
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Spread Out Risk in Your Portfolio by Company, Not Country
By CONRAD DE AENLLEOCT. 9, 2015
http://www.nytimes.com/2015/10/11/busine...untry.html
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Howard Marks' Take on Risk and Reward
September 4, 2014
http://www.barrons.com/articles/SB518857...3277429272#
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Further information with regards to the increase in revenue from the Taiwan segment for 1Q2016 comparing 1Q2015. 

http://infopub.sgx.com/FileOpen/2016%200...eID=408892
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(14-06-2016, 10:54 PM)Boon Wrote: Further information with regards to the increase in revenue from the Taiwan segment for 1Q2016 comparing 1Q2015. 

http://infopub.sgx.com/FileOpen/2016%200...eID=408892
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Is quite amazing the number of responses the company has to made to SGX queries. I also take a peek on the stock chart major movement since 2006.

Sometimes we have to take a step back and look at the bigger picture instead on the numbers as they usually need long track records and management assessment.

(14-06-2016, 10:29 PM)Boon Wrote: Two interesting articles relevant to our discussions, I reckon.
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Spread Out Risk in Your Portfolio by Company, Not Country
By CONRAD DE AENLLEOCT. 9, 2015
http://www.nytimes.com/2015/10/11/busine...untry.html
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Howard Marks' Take on Risk and Reward
September 4, 2014
http://www.barrons.com/articles/SB518857...3277429272#
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There are true in the NY Times article, but not applicable to direct-selling market. One of the major risks of direct selling model, is regulation. Direct-selling model is highly regulated by different rules, and regulators in different countries.

I am a fan of Howard Marks'. I concur with his view, on "Unknowable Future" and the following statement

"We're talking about investors' opinions regarding future return, not facts. Risky investments are – by definition – far from certain to deliver on their promise of high returns."

Thus we need to factor in the unknown-able, and opinions, not facts on future return, into the company valuation.

(not vested, optimistic on company future, but not as optimistic as Boon's   )

2Q2016/1H2016 results is expected to be even more spectacular  - scheduled announcement date, according to AR2015, is 5th Aug 2016.
 
Expecting more scrutiny/queries from SGX then ? Will see !
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I am just setting the stage for a more meaningful discussion…………
 
The strategy risks in this article is an interesting one………..
 
Managing Risks: A New Framework
Robert S. Kaplan / Anette Mikes
FROM THE JUNE 2012 ISSUE
 
Category II: Strategy risks.
A company voluntarily accepts some risk in order to generate superior returns from its strategy. A bank assumes credit risk, for example, when it lends money; many companies take on risks through their research and development activities.
Strategy risks are quite different from preventable risks because they are not inherently undesirable. A strategy with high expected returns generally requires the company to take on significant risks, and managing those risks is a key driver in capturing the potential gains. BP accepted the high risks of drilling several miles below the surface of the Gulf of Mexico because of the high value of the oil and gas it hoped to extract………………………………………….
 
https://hbr.org/2012/06/managing-risks-a-new-framework
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Good article but what is the reality? I recalled, the recent financial crisis, is due to banking sector. Banking sectors are masters of risk management i.e. VAR. The banks were taking extra risks with "good" risk-reward positions with state-of-art risk management processes, but failed badly.

BP, is another good company, with comprehensive risk management processes, but we saw the "Deepwater Horizon Oil Spill" crisis, and a "91 percent decline in profit" due to oil slump recently

https://en.wikipedia.org/wiki/Deepwater_..._oil_spill

http://www.bloomberg.com/news/articles/2...mp-deepens

(not vested)

Linear Relationship:
[Image: concepts1_riskreturn.gif]



From Howard Mark:



Efficient Frontier : Modern Portfolio Theory (Harry Markowitz) 
[Image: Efficient-Frontier.gif]

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HOW DO WE MEASURE RISK? 
http://people.stern.nyu.edu/adamodar/pdf...sk/ch4.pdf
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