Best World

[Boon]

Dun forget the massive exposure to China. The risk of further slowdown is very high.

A good example is OSIM which has been affected to a large extent. Matter of time before best world gets hit I reckon.

YMMV

Sent from my MotoG3 using Tapatalk

Strange line of thought ..IMHO. Best world just got DS licence, company has yet the reap the fruits of this valuable licence. Already, you are talking about slowdown. Best world is now only starting out in Hangzhou, more cities can be gradually added once best world can execute its plan well. I believe the management  is prudent enough to recognise the associated risks/rewards. The best is yet to be....

FY2015 revenue of SGD 20 million is considered massive exposure to China ?

[JanQuin]

"COO mentioned that they are much hungrier and passionate than Singaporean when it comes to direct selling."

is it bcos the product is excellent or the DS commission structure is attractive?!!

It's more like Singaporean are more used to being an employee. Also, in general Singaporeans are still not familiar of DS model and some would still harbour a negative impression of DS.

[CityFarmer]

So, I repeat my question, should I take profit or buy more?

I'm inclined to take profit based on "zero-cost/capital" theory.
However, I'm very mindful of what CF says in term of mid/long term benefits.

Am I going to lost sleep thinking/scratching my head?

I am skeptical on the "zero-cost/capital" theory, which is based on solely your purchased price. I will review current fundamentals, and opportunity cost, to decide on buy-more or sell-partially calls...

[Boon]

Dun forget the massive exposure to China. The risk of further slowdown is very high.

A good example is OSIM which has been affected to a large extent. Matter of time before best world gets hit I reckon.

YMMV

Sent from my MotoG3 using Tapatalk

Strange line of thought ..IMHO. Best world just got DS licence, company has yet the reap the fruits of this valuable licence. Already, you are talking about slowdown. Best world is now only starting out in Hangzhou, more cities can be gradually added once best world can execute its plan well. I believe the management  is prudent enough to recognise the associated risks/rewards. The best is yet to be....

LOL "the best is yet to be" IIRC thats the motto of anglo chinese school

I dun find it to be strange line of thought since I invest firstly by looking at the larger economic picture and sector involved and the risks to it. China may be shifting to consumer, but even that consumer part is not growing by much, most of GDP now still coming from gov infrastruture investment and manufacturing.

And anecdotally, used to have a neighbor who used to be in this kind of "AMWAY" business for many years with a couple of factories in China and was doing well for quite a while (yes he was making millions) but few years back sold off the business as there was too much corruption involved, which was not only eating into profits but also a PITA to manage. (even in Singapore, those in the construction industry will know, the only way to get the Chinamen to work properly is to treat them to some smokes and alcohol. you will have to tell them to "yan jiu yan jiu" research the problem with you. LOL )

DS licence or not, it is a very competitive marketplace in China as well (why has Best World not made much headway, its been around so many years) They have probably decided to go ahead and do some "deals" with the officials granting the DS licences.

There is no protection of intellectual rights so any new money making products will soon be counterfeited and outcompeted (unless you are a AUS/NZ milk or food company, other than packaging cant really copy the contents much without a change in quality)

Of course this is a current "HOT STOCK" with a SEXY growth story. There are quite a few on the SGX nowadays, take your pick.

Jump on but dun forget to jump off.

 
“Dun forget the massive exposure to China” ~ statement 1

Statement 1:
If you are talking about China exposure NOW, BWI’s FY2015 exposure was only SGD 20 million (~ 20% of total group FY2015 revenue), which should not be considered as MASSIVE yet.
 
If you are talking about massive potential revenue exposure in the future, then you must be a believer in statement 2 as well that “the best is yet to be”
 
“LOL "the best is yet to be" IIRC thats the motto of anglo chinese school“ ~ statement 2

Statement 2:
If you are a believer in statement 2, then potential massive China exposure in future would be a potential legitimate concern. This point has been discussed before.
 
“I dun find it to be strange line of thought since I invest firstly by looking at the larger economic picture and sector involved and the risks to it. China may be shifting to consumer, but even that consumer part is not growing by much, most of GDP now still coming from gov infrastruture investment and manufacturing.” ~ statement 3

Statement 3:
How do you explain the fact that “The direct selling market in China, bolstered by a rising consumer culture and more favorable government policies, had registered a 19% growth in 2015”?
 
Have you been looking at the right set of indicators?
 
A pessimist would tend to ignore the positive numbers and focus on the negatives. Likewise, an optimist would tend to focus more on the positives and less on the negatives.
 
“And anecdotally, used to have a neighbor who used to be in this kind of "AMWAY" business for many years with a couple of factories in China and was doing well for quite a while (yes he was making millions) but few years back sold off the business as there was too much corruption involved, which was not only eating into profits but also a PITA to manage. (even in Singapore, those in the construction industry will know, the only way to get the Chinamen to work properly is to treat them to some smokes and alcohol. you will have to tell them to "yan jiu yan jiu" research the problem with you. LOL)” ~ statement 4

Statement 4:
So you are a believer in “nothing get done in China without bribery involved”, based on one “hear say” from a neighbor.
 
Based on that only one “hear say”, are you suggesting that the China faith of all companies operating there, including BWI, would end up similar to your neighbor?
 
“DS licence or not, it is a very competitive marketplace in China as well (why has Best World not made much headway, its been around so many years) They have probably decided to go ahead and do some "deals" with the officials granting the DS licences.” ~ statement 5

Statement 5:
If a DS license would not make any difference, why are you suggesting that companies including BWI bribed their way to get the license?
 
If a DS license would not make any difference, how then would the concern on massive China exposure arise in the first place? And why are you worrying about it now?
 
“There is no protection of intellectual rights so any new money making products will soon be counterfeited and outcompeted (unless you are a AUS/NZ milk or food company, other than packaging cant really copy the contents much without a change in quality)” ~ statement 6

Statement 6:
Try fitting your statement to Amway China – how relevant is it?

http://www.valuebuddies.com/thread-1033-...#pid120098 
  
“Of course this is a current "HOT STOCK" with a SEXY growth story. There are quite a few on the SGX nowadays, take your pick.” ~ statement 7
 
Statement 7:
Are you suggesting there are “no values” in hot and sexy stocks? Name me one with fundamentals better than BWI
 
“Jump on but dun forget to jump off.” ~ statement 8

Statement 8:
DYODD
Understand fully the risk-reward profile
Jump on and jump off when the “price is right” 
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[mslee888]

Sharing from CIMB:

Best World International Ltd (ADD, tp:S$1.61▲) - Licence obtained earlier than expected  Best World announced that it has been granted a direct selling licence in China. This much anticipated event has come in earlier than expected.  The next milestone includes the setting up of requisite service centres. The timeline is for completion by Dec 16 and we expect to see direct sales in China in FY17. Capex is minimal and we do not anticipate a long gestation period as the company already has proven product acceptance in China. We lift our FY17-18F EPS by 23-47% on the new potential in China. Our TP rises on this news. Reiterate Add.

[CityFarmer]

IMO, I doubt, the FY17 EPS growth, will come from China DS market. I reckon, the company, need time to restructure the China biz model. It also need time to re-train distributors, as members. The penalty for misconduct by member in DS model, is very expansive.

The growth, is likely and mostly from Taiwan market.

(not vested, and actively monitoring)

[Boon]

Sharing from CIMB:

Best World International Ltd (ADD, tp:S$1.61▲) - Licence obtained earlier than expected  Best World announced that it has been granted a direct selling licence in China. This much anticipated event has come in earlier than expected.  The next milestone includes the setting up of requisite service centres. The timeline is for completion by Dec 16 and we expect to see direct sales in China in FY17. Capex is minimal and we do not anticipate a long gestation period as the company already has proven product acceptance in China. We lift our FY17-18F EPS by 23-47% on the new potential in China. Our TP rises on this news. Reiterate Add.

3 things a direct selling license will allow Best World to do in China: CIMB
By Michelle Zhu / theedgemarkets.com   | July 4, 2016 : 12:18 PM MYT   

http://www.theedgemarkets.com/sg/article...china-cimb
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[Boon]

FY2017 EPS growth would be driven both by China and Taiwan sales.

Total sales (DS sales + Export sales) to China would grow significantly as well, I reckon, driven more by export sales to other parts of China (less Hangzhou) where no DS permits have been granted. It makes no sense to stop exporting altogether.

In China, direct selling is defined as selling of a company’s products to end consumers through sales personnel outside of fixed retail locations - “无店铺销售”

See  item 10 on FAQ on the following MOFCOM link.
http://zxgl.mofcom.gov.cn/questions.html##

In another words, sales conducted through a “fixed retail outlet” do not fall under direct selling.

“Currently, the Group is exporting its core direct selling brand lines to an agent, who in turn distributes them to members through a network of beauty salons, nail & hair salons and spas all over China. Under the direct selling business model, the Group will convert these networks of spas and salons into distributors and service centres of Best World’s products.”

Here is my interpretation of the above company statement:

Under the current “Export Model”:

There is only ONE importing agent involved.

There is only ONE network of “retail outlets” involved consisting of beauty salons, nail & hair salons and spas all over China.

Sales to end consumers are conducted through this network of “retail outlets”.

End consumers must be members of the network to purchase the products.

To BWI, it is an “export model”, but technically speaking, it is a membership based “retail model”, presumably managed by the agent.

Converting from “Export Model” to “DS model” in areas where DS permits have been granted :

These “retail outlets” would be converted into distributors and service centres of BWZ.

All end consumers (or members) in the approved DS areas would be converted into members and/or distributors of BWZ.

In areas where DS license have not be obtained, it should remain to be operated under the “export model”, I reckon.

This was the approach adopted by Nu Skin China when it was granted its first DS license back in 2006.

http://www.nuskin.com/ns/sg/images/netx/...%20Eng.pdf

The difference between Nu Skin China and BWZ is in the ownership structure of the "retail outlets"

“Retail outlets” then was self-owned by Nu Skin while that for BWZ now is not. 
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[weijian]

I am skeptical on the "zero-cost/capital" theory, which is based on solely your purchased price. I will review current fundamentals, and opportunity cost, to decide on buy-more or sell-partially calls...

Zero cost/capital make sense if you are the kind that seeks to "feel good" about your investments. I mean, doesn't it feel good to hold onto something that is "free"? But as always, in theory it is free, in practice it is not. 
To feel good in investing, it means falling to your behavioral biases. Most profitable investments for the long term needs to involve certain level of discomfort (contrarian, staying out of the crowd, buying beaten down stocks, watching your neighbour/forum member shout "huat")

"Zero" is very enticing and hence very dangerous. Countless clever people have fallen prey to promises of free gifts (eg. Why does "Buy 1 free 1" sound more attractive than "50% discount" when both are the same mathematically?). IMO, zero cost/capital may unwittedly make us fall into a trap of not willing to cut losses because they are "zero cost" and hence it is easier for me to keep them (for the wrong reasons). To sum it up, we take un-necessary risks with "house money".

Our money/capital has to be treated to be fully fungible across asset classes or those invisible compartments that we created for ourselves.

[CityFarmer]

I am skeptical on the "zero-cost/capital" theory, which is based on solely your purchased price. I will review current fundamentals, and opportunity cost, to decide on buy-more or sell-partially calls...

Zero cost/capital make sense if you are the kind that seeks to "feel good" about your investments. I mean, doesn't it feel good to hold onto something that is "free"? But as always, in theory it is free, in practice it is not. 
To feel good in investing, it means falling to your behavioral biases. Most profitable investments for the long term needs to involve certain level of discomfort (contrarian, staying out of the crowd, buying beaten down stocks, watching your neighbour/forum member shout "huat")

"Zero" is very enticing and hence very dangerous. Countless clever people have fallen prey to promises of free gifts (eg. Why does "Buy 1 free 1" sound more attractive than "50% discount" when both are the same mathematically?). IMO, zero cost/capital may unwittedly make us fall into a trap of not willing to cut losses because they are "zero cost" and hence it is easier for me to keep them (for the wrong reasons). To sum it up, we take un-necessary risks with "house money".

Our money/capital has to be treated to be fully fungible across asset classes or those invisible compartments that we created for ourselves.

I am taking the "theory" as a hurdle to compounding, which is the "secret" to success for value investing.