Best World

[Boon]

Manufacturing/Wholesale 
Due to pending changes to product registration requirements
the management has decided to hold back new product registrations and
will engage wholesalers through other marketing activities to improve market demand for its brand offerings.  

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My instinct told me D2/HBC is hinting at Indonesia which is small impact.
If my instinct is wrong, then mmm....

Truly, truly, truly here

Into the override, how we ride the brake
Sleeker and cheaper, the wind change
Following people, they I say
Expect your incentives have paved the way

“Vis-à-vis 1Q2016, revenue contribution from the Manufacturing/Wholesale segment in 1Q2017 declined by 9.9% to $0.9 million. Due to pending changes to product registration requirements, the management has decided to hold back new product registrations and will engage wholesalers through other marketing activities to improve market demand for its brand offerings.”

If my interpretation is correct - they are talking about M/W segment which covers only the Aurigen line of products.

Registration of new Aurigen products are being held back due to pending changes of product registration requirements.

The admission and the registration of BWL line of products into the DS permissible products list (currently consisting 6 Aurugen products) is a separate process, IMO.
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[Temperament]

Just by looking at this company's history, it is really a stock that works miracle.

Can anyone tell why the miracle?

[chialc88]

@B, 安 la.


I'm thinking too far... 
                                 ... Tuas factory.

this is for you, enjoy:

[chialc88]

T: Can anyone tell why the miracle?

I am not sure about other BWL fans' views.

I actually mentioned in this thread post 98.
In fact, a long term valuebuddies HitandRun 
pick up and asked me to justify:
link

I deliberately did not reply in the forum.
Since, you asked again, 
then, you got to see for yourself 
and .......................................
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.............................................
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.............................................
can you feel it in your heart?
p.s. yes, it's un-edited recording with baby crying in the background.

[Boon]

Could someone please enlighten me on why is the exports model in China is experiencing such explosive growth? "Management foresee further increase in repeat consumption amongst existing users as well as the number of new users for DR’s Secret line of skincare solutions". But isn't the direct selling license only for 6 consumables health products from the China company that they took over? What's driving growth in the export model? Are distributors stockpiling to convert into the direct selling model later?

Hi Squirrel,

Here are my views.

Under the export model, BWI exports its BWL line of products to its China agent.
 
The China agent, sells the products to its clientele - traditional business owners of hair salons/beauty salons/nail salons/spas, across China.
 
The agent’s clientele sell the products to their customers through their hair salon chains, beaty salon chains, nail salon chains and spas
 
Development of clientele for its China agent is driven by BWI’s market support staff, product trainers together with a few selected leaders of Taiwan. Their involvement is mainly in terms of product trainings, sales techniques training and product presentation etc, on behalf of the agent.
 
Upon obtaining full DS operational approval in their respective city/area, all customers of the agent’s clientele  in that city/area, will be converted into their downlines – a condition which the agent’s clientele have to agree before being appointed
 
Why the exports model in China is experiencing such explosive growth?
 
Possible reasons:
-      Good and safe quality products.
-      Value for money
-      Good development support in developing the agent’s clientele
-      Scalability of the export model – though not as scalable as the DS model.
-   China is a huge consumers market  
 
Are distributors stockpiling to convert into the direct selling model later?
 
So far, the DS license granted is only for the city of Hangzhou – and only for 6 Aurigen line of health products.
 
Once the BWL line of products has been approved and admitted into the DS permissible products list, Hangzhou would be ready to be converted into the DS mode for BWL line of products.
 
If they are stockpiling, it would be confined to “distributors” in Hangzhou only - provided there are potential profits to be made – this would be dependent on the “pricing” of the products to be set by BWI under the DS mode.
 
Hence, if the are, the scale and their impacts would not be significant, IMO.
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[Boon]

It's always a joy to look at the figures that Boon comes up with post results announcement by Best World.

There is though some concerns that I have on the Q1 figures. Taiwan numbers are slowing on a Y-O-Y basis, and when trends reverse in Direct Selling, it can get pretty ugly quickly before things stabilize. Apparently the management is working towards "quality control" for its sales force lest they get into trouble with regulations. The company even went to the length of removing errant agents.

If Taiwan slows, probably only China can take over the growth baton. But even though this is a quarterly revenue record, management did clarify that it is due to backlog in 4Q and preparing inventory for the following quarter. Typically for Best World Q4 tends to be its best quarter and Q1 its weakest (due to CNY). The only reasoning I can think of for revenue in 1Q2017 to be more than 4Q2016 is because partial backlog in 4Q2016 is recognized in Q1. A $5-7m of revenue back to Q4 shift in revenue would make sense as it would result in 4Q > 3Q and 4Q > 1Q17.

In all, while the Q1 export revenue of $20.555m is a morale booster, I can't help but think how much of it is really done in Q1. Can it sustain the level of revenue going forward? Or will there be a dip in Q2? What exactly is driving the export revenue and causing a >100% improvement?

“Revenue from China grew 102.7% in 1Q2017 vis-à-vis the same period last year, driven by larger shipments during this reporting quarter to fulfil back orders generated in 4Q2016.
 
On top of that, the larger shipments were also necessary so that sufficient inventory is held for the current and following quarter, as Management foresee further increase in repeat consumption amongst existing users as well as the number of new users for DR’s Secret line of skincare solutions.”
 
A back order is a customer’s  order for a product that is temporarily out of stock. In another words, customer demand for the product exceeds a company’s capacity to supply it.
 
Let me flip the question around:
 
If demand in FY2016 as measured by revenue were higher than  200 m, say 250m could BWI cope ? 
 
If it could, backorder wouldn’t have had happened.
 
This makes me wonder if they have encountered bottle neck in their capacity to supply key products to satisfy customers demand– especially on Dr’s Secret.
 
If demand for Dr’s Secret from China + Taiwan + other market exceed capacity to supply, what should the Management do before the Tuas factory is operational?
 
Prioritize ! Allocating more to market with higher return (higher NPM). This probably explains why NPM is still trending higher……….
 
In terms of PBT margin, it is higher to export to China than to sell it under the DS model in Taiwan. The priority this year could be skewed towards China market and "slow down" Taiwan.
 
Just some thoughts. I could be completely wrong. Ha-ha!
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[JanQuin]

Any idea why are they establishing Changsha RC when the direct license is for Hangzhou?

[chialc88]

Simply because Dr Secrets strong hold is currently at
Changsha, Wenzhou, Harbin and Zhongshan.

It's clear that they are stocking up inventories in anticipation that
export model will be converted to direct selling model.

HZ strength is in Aurigen products and manufacturing plants.
At this moment, I'm not able to see whether Dr Secrets is going to generate momentum there.

My previous video on Dora was dated 2007
- opening of Malaysia branch.
Background a bit noisy.

This is another video by Dora.
Key message is the same.
Except this is a training style and she pad it with more sexy salezy stuff.
Watch it so that you know what is MLM:


I believed that in your work place,
there will be one or two very smart guys especially in sales.
Very energetic, lots of ideas, approachable and genuinely caring.

Right?

In BWL, you can find a lot of them.
Everyday, working very smart and very hard...
................................................................................growing your business.

Relax, you're in good hand.

[Squirrel]

Happy Vesak Day as well Chialc88.

The reason why I was asking the above is because I am trying to ascertain the path going forward for the company and whether the company is fairly valued at the moment. There are some areas I am truly concerned about. That includes the following

1) history of reclining revenues in different geographical areas - if you look at the history of Best World, they have never been able to hold onto revenues in any countries at their peak for long. The drop in revenues tends to be fast and furious. Go look up past ARs and you can see the trend.  The revenues don't even hold at 70% levels. They just plummet into oblivion and some rolls under "others" now.

2) it has always been the hope that China will take over in growth, but I just can't wrap my head around the rate of growth in an export model that rivals a direct selling model. The only reason I can give for the current quarters figures is it is not representative (includes 4Q16 and 2Q17 as per commentary)

3) the growth trajectory of China is unknown to me now. The top 20 direct Sellers's would give it a revenue of $400m. Could that be achieved in three years time? If that's the case and assuming Taiwan manage to maintain $120m revenue, profit margin of 16% would give rise to $83.2m in profits and PE of 14 would give rise to 1.164b Market Cap, about 50% above current levels at $4.2.

Personally this stock has gone from a value stock to a growth stock and hence my gradual discomfort in holding it as time goes on. It does not offer as much a value buffer as it used to, though growth is exciting. If 3) does happen, could I find something else undervalued and offering possible 50% upside to its fair value within the next three years?

I would like to take the chance to thank Boon and the forummers here. I held Best World before starting to visit this forum. Looking at the conversations here further gave me confidence in overweighting it in my portfolio. It has been a terrific 14 bagger journey (not including dividends!) from an undervalued gem trading at 6% yield with high cash holdings and burgeoning business. It has been fun seeing the way the business is dissected and following the Taiwan Bulletins.

Perhaps I am trying to find reasons to exit the position, perhaps I am trying not to fall in love with a stock. Or perhaps I just need the value buffer that this stock used to provide. Trying to make sense out of whatever information we have. Thanks everyone for their contributions.

Thanks to all again.

[chialc88]

S, you're thinking of selling BWL? 
Sorry, you're late.

I raised the question back in July 2016:
link

My conclusion at that time and now remains the same.

Today is Vesak day, and my conclusion at that time was based on:
成住坏空
formation, existence, destruction, and emptiness

You already have the ticket, so the question is not whether to buy or not to buy.

Your question is whether you should sell all and get out?
or, just sell some to sleep better, right?
(greed at work mind you and not fear).

Again, my conclusion at that time after input from may valuebuddies,
including City Farmer is very clear.
(at least to me lar).

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S, just want to share with you that my experience is similar if not identical to you:-

I actually started to buy BWL about 2013 timeframe.
There are many reasons why I brought BWL.
Among them, the most important reason is it's a value buy.
NTA at 23+cents and selling below 20cents.
No or min debt with lots of cash.

Everyday, I use my SCB to queue below 20cents.
Very little transactions.
Only occasionally some kind soul will dump 10 lot or 20 lots to me.

Then, the bad news, 2014 Sam Goi brought BWL.
No chance to buy below 20cents and then I took my eyes off.

Until today, I sold about 10% to buy a particular stocks that I fall in love.
This particular stock ....
....................................
......................................
....................................... if you ask me for stock tips, I will tell you.

In any case, read my posts in BWL to know my decisions on selling.

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BTW, if after you watch the above 2 video on Dora and
found her to be ah lian, ah lian.
Don't let that fool you.

Dora is actually very popular in Singapore Entrepreneur landscape.
Watch the stuffs that she did:
Amazing hur...