Best World

(02-05-2018, 01:44 PM)Boon Wrote:

(01-05-2018, 12:33 AM)dreamybear Wrote: .........(truncated)

There is quite substantial Q&A on the low export sales in 1Q2018(ref : pg 12/13 AR), but basically the reason is as per given in the AR.

.........(truncated)

"There is quite substantial Q&A on the low export sales in 1Q2018(ref : pg 12/13 AR), but basically the reason is as per given in the AR."

Hi Dreamybear,

The reason given in 4Q/FY2017 results is: 

“As Export Agent had placed their orders for the next three to six months in 4Q2017, there is a possibility that 1Q2018 may be weaker than 1Q2017”.

whereas reason given in AR2017 (page 12/13) is "the conversion from Export Model to China Wholesale Model".

Why the inconsistency ?

Hi Boon,

Some shareholders were worried abt the possible drop in share price because of this low export in 1Q2018, so during the AGM, they wanted to clarify with HBC.

I think it is the “manner” in which it is written. BW is currently shifting from

Existing Export Agent(EA) model : BW > EA > Beauty/Hair Salons > Members/Customers  

to

New China wholesale model : Subsidiary BW China Pharmaceutical Co. (BWCP) > Exp Center(converted fr Beauty/Hair Salons) > Members/Customers.

Because there is a change in company(from EA to BWCP) importing products into China, there are additional paperwork to be approved by the Chinese govt. During this transition period, mgmt wants to factor in any delays which may arise from obtaining the necessary approvals. Hence in 4Q2017, BW deliberately imported more goods(i.e. 3 – 6 months worth) through EA, in case all the paperwork for BWCP hasn’t been sorted out by 1Q2018. This wil ensure ample supply for goods in China throughout 1Q2018.

So for 1Q2018, the revenue in the Export segment will be minimal(since already acct for in 4Q2017 revenue as additional supply were imported as a buffer). I guess in the event that the additional supply of goods imported through EA during 4Q2017 are not exhausted by 1Q2018,  the 2Q2018 overall revenue figures will be impacted too. (once BWCP is in operation, revenue will be captured under China Wholesale category.)  

------------

On a separate note(welcome views from all forumers) , since mgmt mentioned China Direct Selling regulation to be “3 levels 2 layers”(translated from Chinese), does it mean the following structure :

BWCP (level 1)

      | (Layer1)

Exp Center (EC) / Distributors  (level 2)     < earn DS commission >

     | (Layer 2)

Customers (level 3)

If this is the case, does it mean
1.  Since only 1 level of commission is allowed, each BW China distributor has to work harder than traditional MLM because he/she cannot leverage off the network effect ? 
2.  Unless a person has the capital to open a EC, he/she cannot be a distributor ?

Would be grateful if anyone who is currently a China DS can share some insights.

(02-05-2018, 06:34 PM)dreamybear Wrote:

(02-05-2018, 01:44 PM)Boon Wrote:

(01-05-2018, 12:33 AM)dreamybear Wrote: .........(truncated)

There is quite substantial Q&A on the low export sales in 1Q2018(ref : pg 12/13 AR), but basically the reason is as per given in the AR.

.........(truncated)

"There is quite substantial Q&A on the low export sales in 1Q2018(ref : pg 12/13 AR), but basically the reason is as per given in the AR."

Hi Dreamybear,

The reason given in 4Q/FY2017 results is: 

“As Export Agent had placed their orders for the next three to six months in 4Q2017, there is a possibility that 1Q2018 may be weaker than 1Q2017”.

whereas reason given in AR2017 (page 12/13) is "the conversion from Export Model to China Wholesale Model".

Why the inconsistency ?

Hi Boon,

Some shareholders were worried abt the possible drop in share price because of this low export in 1Q2018, so during the AGM, they wanted to clarify with HBC.

I think it is the “manner” in which it is written. BW is currently shifting from

Existing Export Agent(EA) model : BW > EA > Beauty/Hair Salons > Members/Customers  

to

New China wholesale model : Subsidiary BW China Pharmaceutical Co. (BWCP) > Exp Center(converted fr Beauty/Hair Salons) > Members/Customers.

Because there is a change in company(from EA to BWCP) importing products into China, there are additional paperwork to be approved by the Chinese govt. During this transition period, mgmt wants to factor in any delays which may arise from obtaining the necessary approvals. Hence in 4Q2017, BW deliberately imported more goods(i.e. 3 – 6 months worth) through EA, in case all the paperwork for BWCP hasn’t been sorted out by 1Q2018. This wil ensure ample supply for goods in China throughout 1Q2018.

So for 1Q2018, the revenue in the Export segment will be minimal(since already acct for in 4Q2017 revenue as additional supply were imported as a buffer). I guess in the event that the additional supply of goods imported through EA during 4Q2017 are not exhausted by 1Q2018,  the 2Q2018 overall revenue figures will be compacted too. (once BWCP is in operation, revenue will be captured under China Wholesale category.)  

------------

On a separate note(welcome views from all forumers) , since mgmt mentioned China Direct Selling regulation to be “3 levels 2 layers”(translated from Chinese), does it mean the following structure :

BWCP (level 1)

      | (Layer1)

Exp Center (EC) / Distributors  (level 2)     < earn DS commission >

     | (Layer 2)

Customers (level 3)

If this is the case, does it mean
1.  Since only 1 level of commission is allowed, each BW China distributor has to work harder than traditional MLM because he/she cannot leverage off the network effect ? 
2.  Unless a person has the capital to open a EC, he/she cannot be a distributor ?

Would be grateful if anyone who is currently a China DS can share some insights.

There is nothing stopping both EA and BWCP from importing products into China at the SAME time, is there?
 
Why must EA stop importing BEFORE BWCP starts importing? (or why must BWI stop exporting to EA BEFORE it starts exporting its own products to its China subsidiary, BWCP ?)
 
Logically, to assure “continuity” of supply in China, BWI must ensure that BWCP would have imported enough stocks into China BEFORE stopping supplying to EA (through exporting). And this is the pre-condition that could be planned way ahead.
 
If BWCP failed to import any products into China, BWI would just have to keep exporting to EA, wouldn't it ? 
 
Therefore, the argument that “BW deliberately imported more goods(i.e. 3 – 6 months worth) through EA, in case all the paperwork for BWCP hasn’t been sorted out by 1Q2018. This wil ensure ample supply for goods in China throughout 1Q2018” doesn’t make sense to me.

(16-05-2018, 08:50 AM)Boon Wrote:

(02-05-2018, 06:34 PM)dreamybear Wrote:

(02-05-2018, 01:44 PM)Boon Wrote:

(01-05-2018, 12:33 AM)dreamybear Wrote: .........(truncated)

There is quite substantial Q&A on the low export sales in 1Q2018(ref : pg 12/13 AR), but basically the reason is as per given in the AR.

.........(truncated)

"There is quite substantial Q&A on the low export sales in 1Q2018(ref : pg 12/13 AR), but basically the reason is as per given in the AR."

Hi Dreamybear,

The reason given in 4Q/FY2017 results is: 

“As Export Agent had placed their orders for the next three to six months in 4Q2017, there is a possibility that 1Q2018 may be weaker than 1Q2017”.

whereas reason given in AR2017 (page 12/13) is "the conversion from Export Model to China Wholesale Model".

Why the inconsistency ?

Hi Boon,

Some shareholders were worried abt the possible drop in share price because of this low export in 1Q2018, so during the AGM, they wanted to clarify with HBC.

I think it is the “manner” in which it is written. BW is currently shifting from

Existing Export Agent(EA) model : BW > EA > Beauty/Hair Salons > Members/Customers  

to

New China wholesale model : Subsidiary BW China Pharmaceutical Co. (BWCP) > Exp Center(converted fr Beauty/Hair Salons) > Members/Customers.

Because there is a change in company(from EA to BWCP) importing products into China, there are additional paperwork to be approved by the Chinese govt. During this transition period, mgmt wants to factor in any delays which may arise from obtaining the necessary approvals. Hence in 4Q2017, BW deliberately imported more goods(i.e. 3 – 6 months worth) through EA, in case all the paperwork for BWCP hasn’t been sorted out by 1Q2018. This wil ensure ample supply for goods in China throughout 1Q2018.

So for 1Q2018, the revenue in the Export segment will be minimal(since already acct for in 4Q2017 revenue as additional supply were imported as a buffer). I guess in the event that the additional supply of goods imported through EA during 4Q2017 are not exhausted by 1Q2018,  the 2Q2018 overall revenue figures will be compacted too. (once BWCP is in operation, revenue will be captured under China Wholesale category.)  

------------

On a separate note(welcome views from all forumers) , since mgmt mentioned China Direct Selling regulation to be “3 levels 2 layers”(translated from Chinese), does it mean the following structure :

BWCP (level 1)

      | (Layer1)

Exp Center (EC) / Distributors  (level 2)     < earn DS commission >

     | (Layer 2)

Customers (level 3)

If this is the case, does it mean
1.  Since only 1 level of commission is allowed, each BW China distributor has to work harder than traditional MLM because he/she cannot leverage off the network effect ? 
2.  Unless a person has the capital to open a EC, he/she cannot be a distributor ?

Would be grateful if anyone who is currently a China DS can share some insights.

There is nothing stopping both EA and BWCP from importing products into China at the SAME time, is there?
 
Why must EA stop importing BEFORE BWCP starts importing? (or why must BWI stop exporting to EA BEFORE it starts exporting its own products to its China subsidiary, BWCP ?)
 
Logically, to assure “continuity” of supply in China, BWI must ensure that BWCP would have imported enough stocks into China BEFORE stopping supplying to EA (through exporting). And this is the pre-condition that could be planned way ahead.
 
If BWCP failed to import any products into China, BWI would just have to keep exporting through to EA, wouldn't it ? 
 
Therefore, the argument that “BW deliberately imported more goods(i.e. 3 – 6 months worth) through EA, in case all the paperwork for BWCP hasn’t been sorted out by 1Q2018. This wil ensure ample supply for goods in China throughout 1Q2018” doesn’t make sense to me.

I believe there are questions on why there is a need in the first place to pre order 6 months of goods for a conversion. And would that mean that last year's profit has been artificially bumped up by multiples? It won't be a straight 1.5x of profit for 6 months of goods, but rather a higher multiple on that with the fixed cost associated with the firm. How should last year's China export figures be interpreted?

In the 1Q report, its troubling to see Taiwan's revenue continue to spiral down. A 35% drop Y-O-Y with Q12017 already registering circa 8% drop Y-O-Y from 2016. As per previous concerns, will it follow down the path to being included as "Others" like the other prominent markets it used to have? It will be interesting to track Taiwan progress in order to gauge their staying power in a market, which up till now does not have a good track record.

i concur with Squirrel comments. BW spent so much effort to grow Taiwan market to a TOP10 position. Its puzzling that suddenly Taiwan market faces so many road bumps eg. lower retention rate of members and steep falling revenues. I really wonder whether BW products are a fad since there appears to have no stickiness with their members and users. 
2Q2018 is likely to be poor too. 
Have to see if 2H2018 will there be a U-Turn.

So what is correct figure for China Export in 1Q2018 ? It starts to get "messy"

http://bestworld.listedcompany.com/newsr...VUEC.1.pdf
 
The Board of Directors (the “Board”) of Best World International Limited (“the Company” and together with its subsidiaries, the “Group”) refers to the 1Q2018 results released by the Group on 14 May 2018 and wishes to inform that there is a classification error on the revenue by business segments and the reclassified information is presented as follows:
1Q2018:
Export = 6,219,000
http://bestworld.listedcompany.com/newsr...CCQH.1.pdf
 
1Q2018 = 7,980,000
 
page 13:
“In line with the last results announcement, the Group took its first step in converting the Export segment into the new segment of China Wholesale in 1Q2018. During the transition, some stock keeping units (SKU) of the Group’s brands were imported into China with the Group’s subsidiary Best World (China) Pharmaceutical (BWCP), replacing the previous agent as the new sole importing agent. As these exports are through the Group’s subsidiary BWCP, no export revenue or profit can be recognized until such point that the products are sold to BWL Experience Centres.
Taking the above into consideration and because the Export Agent had already received their inventory for 1H2018 in 4Q2017, technically, no Export should be required for 1Q2018. However, due to strong market demand in 1Q2018 resulting in stock shortages for some SKUs on the Agent’s side, $8.0 million of Export were still required in 1Q2018. “

(16-05-2018, 10:16 AM)Boon Wrote: So what is correct figure for China Export in 1Q2018 ? It starts to get "messy"

http://bestworld.listedcompany.com/newsr...VUEC.1.pdf
 
The Board of Directors (the “Board”) of Best World International Limited (“the Company” and together with its subsidiaries, the “Group”) refers to the 1Q2018 results released by the Group on 14 May 2018 and wishes to inform that there is a classification error on the revenue by business segments and the reclassified information is presented as follows:
1Q2018:
Export = 6,219,000
http://bestworld.listedcompany.com/newsr...CCQH.1.pdf
 
1Q2018 = 7,980,000
 
page 13:
“In line with the last results announcement, the Group took its first step in converting the Export segment into the new segment of China Wholesale in 1Q2018. During the transition, some stock keeping units (SKU) of the Group’s brands were imported into China with the Group’s subsidiary Best World (China) Pharmaceutical (BWCP), replacing the previous agent as the new sole importing agent. As these exports are through the Group’s subsidiary BWCP, no export revenue or profit can be recognized until such point that the products are sold to BWL Experience Centres.
Taking the above into consideration and because the Export Agent had already received their inventory for 1H2018 in 4Q2017, technically, no Export should be required for 1Q2018. However, due to strong market demand in 1Q2018 resulting in stock shortages for some SKUs on the Agent’s side, $8.0 million of Export were still required in 1Q2018. “

1Q2018: (SGD)
Total Export Revenue = 6.219 m  ( and not 7.980 m as wrongly reported )
China Revenue = 6.809 m
China (Manufacturing /Wholesale) = 0.804 m
China Export = 6.809 – 0.804 = 6.005 m (implied)
Implied Myanmar Export = 6.219 – 6.005 = 0.214 m
 
In China, there is no DS revenue, only Export revenue and “M/W” revenue.  How could DS revevue ( in other markets other than China and Myanmar” be “wrongly classified” with “Export Revenue ( from China plus Myanmar) in the first place. Geographically, there are different markets.
 
Even if Total Export = 7.980 m were NOT a mistake, it would still be a mistake in arriving at a China Export figure of 8 million, as Total China revenue (Export + M/W) is only 6.809 m
 
Does the management know what they are doing?

I was also caught by surprise on the size of TW decline for 1Q18 (Given that revenue for TW(2017) : 87,961 vs TW(2016) : 122,959 is about $35m lesser already). According to BWI 2017 AR, TW is headed by a direct selling veteran with over 20 years of management experience within the Industry....., so it does seem strange that TW hasn't stablized. 

Ref Section 10 of 1Q18 results, "The conversion of Export to the new China Wholesale segment is expected to extend into 2Q2018 as export agent continues to deplete its inventory. Revenue from the Export Segment in 2Q2018 is also expected to be lower than that of 2Q2017. The Group’s China subsidiary BWCP may be able to register its first revenue contribution for the China Wholesale segment in 2H2018", it seems that the 2Q18 China results may be challenging, and the overall results may be worse if TW's decline is not stopped by then.

BWI has been conducting share buy back over past 2 days i.e. 16 May at prices 1.26 - 1.29 and 17 May at prices 1.25 - 1.26.
http://www.bestworld.com.sg/ir-announcements.html

Share price has dropped ~34% from its recent all time peak of SGD 1.90 (ex-bonus, ex-split) per share to 1.25 per share as of yesterday.
 
Number of shares issued ~ 550 m shares
Market Cap based on 1.25 per share ~ SGD 690 m
Maximum number of shares authorized to buy back ~55m shares ( = 10%) 
Cash needed to buy back 55 m shares at 1.25 per share ~ 69 m
 
Cash as at 31 Mar 2018 ~ SGD 89 m
 
Question remains:
 
At 1.25 per share, how many shares could BWI afford and prepared to buy back its own shares?

(01-05-2018, 03:08 PM)Boon Wrote:

(08-04-2018, 12:36 PM)Wonderful Wang Wrote:

(12-09-2017, 11:17 PM)Boon Wrote:

(12-09-2017, 05:08 PM)Value Explorer81 Wrote: https://www.nextinsight.net/story-archiv...-in-2h2017

Best World's chief operating officer, Huang Ban Chin, didn't overstate things when he said in an interview with Business Times last week: “The company is on track to hit analyst targets of S$41 million to S$44 million of net profit for 2017. This translates to a 20-30 per cent improvement from 2016.” 

What drove profit growth in 1H2017 was demand for Best World’s DR’s Secret skincare range of products in China. This will continue to be the thrust in 2H2017, as Best World widens its outreach to Chinese consumers.

Seems like BWI is not affected by the crackdown in China and they are on track to achieve $41mm to $44m NPAT in line with analyst estimates. A company that continue to deliver value to both its customer and to society will continue to thrive and do well. BWI stock price is also starting to recover from the crash.

Without the “illegal multi-level-compensation structure”, how would the “real” demand be? How would the “real” sales figure be? “The COO didn’t overstate things”, it got to be kidding, I reckon.

Boon,

I'm wondering what caused you to change your view on Best World.

In May 2017, you were bullish:

Share price closed at 2.81 (post-bonus) or 3.51 (pre-bonus)  – another new all time high record. 

  Based on  0.24 (pre-bonus) a share, it is inching closer to 15-bagger now

https://www.valuebuddies.com/thread-1033-page-44.html


But in Sep 2017, you doubted and wrote:

Without the “illegal multi-level-compensation structure”, how would the “real” demand be? How would the “real” sales figure be? “The COO didn’t overstate things”, it got to be kidding, I reckon.

https://www.valuebuddies.com/thread-1033-page-76.html

Ha-ha ! Seems to me that you are asking the "obvious"................Without the “illegal multi-level-compensation structure”, how would the “real” demand be?

Hi Boon,

Would you be able to provide us with your insights to why you changed your mind?

Also, what are you referring to that is "obvious"?