Best World

[brattzz]

Just wanna say i salute Boon for being so objective. From an early advocate of BWL to questioning their practice. Newcomers would never have guessed. In other forums flames would have already started

That's what makes this forum great. Objective VBs that doesn't fall in love when things change.

yaloh, VB's are fiercely passionate about values, and not afraid to voice out facts and figures, highly valuable traits!

Boon = very detail person lah!

[Boon]

Thanks to Boon and the rest of the VB buddies for the comments.
I stand corrected on my opinion regarding Best World, and i hope to hear more from all of you.

I invested into Best World since the share price was 50+cents and am still holding onto it now. Actually after reading many of your comments, i started to feel a little insecure and worry on the risks i have to bear if i continue holding onto the share.  Selling off has not crossed into my mind yet at the moment, with the following opinions:
(1) Best World completed the acquisition of ZHEJIANG SOLIDGOLD PHARMACEUTICAL CO., LTD. (BWZ) in Feb 2014. BWZ's existing retail distribution network comprising of 153 agents and distributors throughout 31 provinces in the PRC, this includes beauty salons/nail salons/hair salons across China.
(2) Since the initiation of this acquisition in 2013 til YTD Q12017, the Export model has generated an uptrend revenues.
(3) Best World generated Export model revenue from their products sold to agents and through their agents, they are sold to BWZ's existing retail distribution network as mentioned above.
(4) Since all these salons are BWZ's existing retail, i guess it is easier & being more motivated for Best World to train this business people (owner of the salons), which in return Best World receives some training fees from the agents.
(5) In China, a business person can own tens or even hundreds of shops/salons. So, it is possible that one of the top Best World agent's distributor is one of the owner of tens/hundred of salons owned in China.
(6) How did the Rewarding System (PD, GD, SD) being created under Export model in China? I think Best World might be adjusting the rewarding system according to their sales performance of the agents/distributors with DIFFERENT QUALIFICATION MECHANISM depending on which market they are operating in. Although these distributors are not Best World's direct members, but Best World thinks it is necessary to reward them especially during incentives tips, moreover since a decade ago Best World has always been aiming to enter into China DS model. So it is just natural for them to prepare these "foreign agent" (not direct members) into DS leaders in preparing to enter the next phase of growth.

While continuing in reading this forum's comment on Best World, i will wait until Q2 result out to decide on my holding on Best World. But, if any of the comment really strike me to think & do more analysis or scuttlebutt deeper on any possibility on Best World business & management integrity, i might change my mind to load off my position.

For the moment, i choose to trust their management & their system.

Thank you for reading.

@ investor1,

Your facts under 1), 3) & 4) above (in red font) are completely wrong. Please provide source and reference !
Will discuss further on your other points later.
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Thanks to Boon and the rest of the VB buddies for the comments. 
I stand corrected on my opinion regarding Best World, and i hope to hear more from all of you.

I invested into Best World since the share price was 50+cents and am still holding onto it now. Actually after reading many of your comments, i started to feel a little insecure and worry on the risks i have to bear if i continue holding onto the share. Selling off has not crossed into my mind yet at the moment, with the following opinions:
(1) Best World completed the acquisition of ZHEJIANG SOLIDGOLD PHARMACEUTICAL CO., LTD. (BWZ) in Feb 2014. BWZ's existing retail distribution network comprising of 153 agents and distributors throughout 31 provinces in the PRC, this includes beauty salons/nail salons/hair salons across China. (Wrong facts)
(2) Since the initiation of this acquisition in 2013 til YTD Q12017, the Export model has generated an uptrend revenues. (Two lines of products distributed through two independent distribution channels. Should there be any correlation between Export revenue and M/W revenue?)
(3) Best World generated Export model revenue from their products sold to agents and through their agents, they are sold to BWZ's existing retail distribution network as mentioned above. (Wrong facts)
(4) Since all these salons are BWZ's existing retail, i guess it is easier & being more motivated for Best World to train this business people (owner of the salons), which in return Best World receives some training fees from the agents. (Wrong facts)
(5) In China, a business person can own tens or even hundreds of shops/salons. So, it is possible that one of the top Best World agent's distributor is one of the owner of tens/hundred of salons owned in China. (Possible, but DMJ, the new SDA, the top 10 earner among BWI’s distributor in FY2016 is not, according to her testimony video. Could she have done it without her networks of downlines? That's the key question.)
(6) How did the Rewarding System (PD, GD, SD) being created under Export model in China? I think Best World might be adjusting the rewarding system according to their sales performance of the agents/distributors with DIFFERENT QUALIFICATION MECHANISM depending on which market they are operating in. Although these distributors are not Best World's direct members, but Best World thinks it is necessary to reward them especially during incentives tips, moreover since a decade ago Best World has always been aiming to enter into China DS model. So it is just natural for them to prepare these "foreign agent" (not direct members) into DS leaders in preparing to enter the next phase of growth. 
(The Ranking criteria is the same=> PD, GD,SD, etc.
The SDA award criteria of “having 5-PD-downlines” is the same.
Where is the difference?)

While continuing in reading this forum's comment on Best World, i will wait until Q2 result out to decide on my holding on Best World. But, if any of the comment really strike me to think & do more analysis or scuttlebutt deeper on any possibility on Best World business & management integrity, i might change my mind to load off my position. 
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[specuvestor]

See the part on Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order. I would think that many legit MLM that are focused on products and services not recruitment, including Best World, is legal

https://www.mti.gov.sg/legislation/Pages...lling.aspx

@investor1, I have invested in BW earlier than you do, and am still holding it.

With some exposure to DS/MLM, my fear is not on exactly what Boon has pointed, because this has been a practice, even in SG, as I pointed out earlier. Squirrel has also showed some articles pertaining to DS license. These are my thoughts:

1. Direct selling business is a risky business. It is difficult to control the agents/distributors who are not direct employees of the company. On one hand, the company wants to keep agents/disty who are able to expand the business, but the company also need to have some accountability how the agents/disty conduct their business as bad reputation will tarnish the brand. However, it is not easy, hence get out of your investment if this risk is not acceptable to you.

2. Besides agents/disty conduct their business shabbily, it is also hard for the company to make sure no one tries to produce “fake” products. For instance, in China, there are people who “fake” Amway protein and pass it on as the real thing. So I wouldn’t be surprise there is fake DR’s Secret one day. And surely, if such news surface, BW might suffer price crash....hence be prepared.

3. Any super agent/disty can "disappear" (I saw many good leaders come and go in a DS/MLM environment), will this impact the sales for BW. Is this a risk, that depends on how you look at it.

4. I do not think BW will train its agent. For a DS/MLM to "impact skill", the newer recruit basically trained and get assisted by their leaders/upline. Therefore as someone involve in a DS/MLM, I see my over-ride commission necessary. By the way, I can't speak for BW marketing plan, but Amway marketing plan is fair. My "sleeping" uplines do not get commission from my revenue, only those "at work" will probably but not necessary get something. I believe BW is along the same line....if is not win-win, the plan will fail eventually.

5. The above are just some risk such company would face. Hence, if you are not prepared, get out please. It takes conviction to feel at peace with your investment. If there is no peace, then maybe reduce risk is a better and healthy choice.

6. However, I would like to highlight that all businesses carry some form of risk but how “real” are these risk. If such model have been practicing in China (based on my Amway exposure plus what BW IR stated), why are such practices allowed? And if there is high probability of BW DS license to be revoked?  

7. Why most of you here focus on China—if is MLM or not? I have stated earlier that Singapore also do not allow MLM, and probably in all the other regions that BW conducted her business may not be permitted. How about BW DS license for example in Taiwan, Singapore and so on get revoke?

8. Even if the system (663) is not the trigger point for license to be revoked, it can be the conduct of any agents/disty, if they are not mentored with leaders with integrity. How BW manage their agents/disty is a bigger concern for me than going through length investigating if the system is legal or not. Let the authority do it, our job as an investor is to evaluate if the risk/reward is acceptable in the worst probably scenario.

9. On the other hand, there are so many MLM companies prosper in Singapore—including insurance and property agencies also practise multi level commission, why is it allowed in Singapore? Singapore is a HIGHLY REGULATED country, why multi level commission scheme is able to conduct here?

10. The legality on DS license should be looked into earlier (for example how it conduct its business in SG), not when the company is entering China market. This is risk from day 1 if one decides to invest in a DS/MLM business.

11. I am not saying the DS license in China is not important, but instead of focusing if the agts/distys doing the right way or not (like I said, such conduct has been there since a long long time), focus on the effectiveness on the products. I heard DR’s Secret is a wonderful series of skin care, and that may form a strong foundation on its sales.

12. Another area I will focus on is the management. Can I trust the management on their leadership, integrity and so on.

13. The PE of Best World, in my view is fair, even if no DS revenue. Its export/retail is doing as fine. My current concern is if the agts/disty over stocked in preparation of DS, what is the "real" demand from China consumers? Another concern is how effective and receptive is DR’s Secret product in China, the sustainability. The success in Taiwan market seems to provide some indication, but still too early to make any confirmation.

14. When the revenue in China grow, then I may be more concern on sustainable, currently, the sales is actually still small in my view.

15. Export/retail license allows products to be sold via a shop (mostly beauty, hair saloons), i.e. B to C. However with a DS license, it enables C-C. If the transition is successful, the growth should be exponential.

This is my view, do your due diligence.

[Boon]

=> Is it conceptually correct to make recognition and awards to agent who have achieved sales "illegally" ? 
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It is conceptually correct because the DS license is approved by BWI proposal, thus the DS model proposed is "correct"

It might be incorrect on the implementation, based on the input from buddies, including yours.

To add-on, China "legal direct selling model" is slightly different from global norm, thus all DS companies operating in China have adopted a slight different model in China e.g. Amway and Nu Skin. A learning phase is required for new comer like BWI, IMHO

What do you mean by the DS model proposed is "correct"?

A DS license has been awarded to BWZ to sell 6 Aurigen line of products in Hangzhou.

BWI has no DS permit to sell DRs Secret in China yet.

Retail, online or DS mode etc=> downlines relationship/ multi-level-commission are considered illegal in China.
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[dreamybear]

Many thanks to Boon and the various buddies for the BWI comments.

I must say I learn a lot from the discussions, especially from the level of details Boon dwell into. It can take me a few days to fully absorb/understand some of the points made by Boon. Maybe because I am neither an investment professional nor related to any MLM. However, from the handful of stocks in my SG portfolio, this is one stock I am most knowledgeable about as a result.

For those interested, nextinsight has published an updated CIMB report today(https://nextinsight.net/story-archive-ma...-says-cimb), and more detailed information e.g. MLM risk factors, China model can also be found in Nuskin Annual Reports(http://ir.nuskin.com/phoenix.zhtml?c=103...ortsannual); they provide more details on MLM compared to the BWI AR.

vested - still keeping the faith.

[mslee888]

Many thanks to Boon and the various buddies for the BWI comments.

I must say I learn a lot from the discussions, especially from the level of details Boon dwell into. It can take me a few days to fully absorb/understand some of the points made by Boon. Maybe because I am neither an investment professional nor related to any MLM. However, from the handful of stocks in my SG portfolio, this is one stock I am most knowledgeable about as a result.

For those interested, nextinsight has published an updated CIMB report today(https://nextinsight.net/story-archive-ma...-says-cimb), and more detailed information e.g. MLM risk factors, China model can also be found in Nuskin Annual Reports(http://ir.nuskin.com/phoenix.zhtml?c=103...ortsannual); they provide more details on MLM compared to the BWI AR.

vested - still keeping the faith.

Thanks dreamybear. Nuskin AR has given me some insights on CHina sales compensation plan. BWI may use a different approach. Seeing that Nuskin do modify their sales compensation plan to suit China market means there are definitely some regulatory concerns. I am sure BWI should have an appropriate way to deal with it since they are a late comer in China market using DS approach and can shd learn from the competitors best practices.

[Boon]

Many thanks to Boon and the various buddies for the BWI comments.

I must say I learn a lot from the discussions, especially from the level of details Boon dwell into. It can take me a few days to fully absorb/understand some of the points made by Boon. Maybe because I am neither an investment professional nor related to any MLM. However, from the handful of stocks in my SG portfolio, this is one stock I am most knowledgeable about as a result.

For those interested, nextinsight has published an updated CIMB report today(https://nextinsight.net/story-archive-ma...-says-cimb), and more detailed information e.g. MLM risk factors, China model can also be found in Nuskin Annual Reports(http://ir.nuskin.com/phoenix.zhtml?c=103...ortsannual); they provide more details on MLM compared to the BWI AR.

vested - still keeping the faith.

Thanks dreamybear,

Looks like the CIMB report is focussing on potential upsides only without taking into considerations of the potential downside risks. ha-ha !
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[dreamybear]

mslee888/Boon - Both of you are welcome - at least I made some contribution amid all the professionals here.

mslee888 - Herbalife also seems to be having problems in China(e.g. http://www.marketwatch.com/story/herbali...2017-02-23), there are also some case studies there.

Boon - that's why I trust your views more than analysts' reports(noted your caveat though).

Like one of the Millionfaith's points, all businesses carry some form of risks.

IMHO, I think sometimes it's quite hard for business owners to follow the rules to the letter(compared to being an employee). Sometimes, one has to learn from observing how others are currently doing and base more on the rationale behind the rules. However, having said this, I do agree the BWI China business is a red flag. On the other hand, I trust the BWI management is trying its best not to do anything illegal.

Maybe a little sidetrack .... one thing I have never managed to figure out all these years is how do SG companies like Keppel Corp, Captialand, etc manage to prosper in countries where corruption is rampant and when corruption is not tolerated for SG companies. There have been some persecution cases in SG but I do not think amounts involved are anywhere near those cases.

[Boon]

So some one has done some on ground check on BWL sales convention in WHERE?
1)  BWL holds most of its convention there.
2)  Company name, brand and systems are the subjects of the event.
3)  So, who is the actual organizer of this event? 
4)  Not BWI & companies of course as “All DR’s Secret service outlets/workshops in China are operationally independent and do not have any contractual agreement with Best World and any of its subsidiaries.”- according to reply from IR to moneyspinner and JanQuin.
5)  Must be BWI’s China Agents/Distributor, right? Who else could it be?
6)  Has approval or consent being granted by BWI for such an event?
7)  If yes. there must be a written consent – which is a form of agreement - but there is no agreement according to 3) above.
8)  If NO, the management is putting company’s reputation, systems, brand reputation at great risks of being misuse and abuse.
9)   Is this how BWI manage its “Export business” in China? 
10) What is the incentive of existing distributors recruiting more new distributors ? 
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[Squirrel]

BoonSo some one has done some on ground check on BWL sales convention in WHERE?
1)  BWL holds most of its convention there.
2)  Company name, brand and systems are the subjects of the event.
3)  So, who is the actual organizer of this event? 
4)  Not BWI & companies of course as “All DR’s Secret service outlets/workshops in China are operationally independent and do not have any contractual agreement with Best World and any of its subsidiaries.”- according to reply from IR to moneyspinner and JanQuin.
5)  Must be BWI’s China Agents/Distributor, right? Who else could it be?
6)  Has approval or consent being granted by BWI for such an event?
7)  If yes. there must be a written consent – which is a form of agreement - but there is no agreement according to 3) above.
8)  If NO, the management is putting company’s reputation, systems, brand reputation at great risks of being misuse and abuse.
9)   Is his how BWI manage its “Export business” in China? 
10) What is the point of existing distributors recruiting more new distributors ? 
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Its interesting that the analyst Jonathon went down to the convention and had a look at everything that's going on and raised 0 concerns on regulations. His biggest concern is "weaker than expected sales in Taiwan or China" which he has addressed in his report as not really a worry.

Doesn't one wonder why in Changsha, which is not a licensed DS region and Dr Secret which is not a licensed product is being distributed by so many people there? What makes Jonathan so confident that there is no wrongdoing on the ground? Maybe someone can email him to ask him? jonathanwp.seow@cimb.com

I guess as long as they get the Changsha + Dr Secret approval as soon as possible, any prior business practices can be glossed over like how the convention videos are removed and there is not really much ground for debate.


The share price reaction today is definitely shouting at Boon and me saying "You are wrong in your questions!". And perhaps the stock might go up by another ten fold in the next 5 years. Its a risk one has to take i suppose with a juicy reward painted by analysts.

Please do your own due diligence. (Btw, how do you adad a signature?! I am tired of typing this with every post. )