Best World

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(03-03-2018, 05:25 AM)Boon Wrote:
(02-03-2018, 05:33 PM)Millionfaith Wrote:
(01-03-2018, 10:23 PM)dreamybear Wrote:
(01-03-2018, 05:36 PM)Value Explorer81 Wrote: Congratulations to BWI shareholders as BWI continue to deliver a healthy set of results for FY 17. I attended BWI investor dialogue on the 27 Feb 2018 at 10am. Their management (Ban Chin) is really very clear on the direction and strategies that they want to go and execute. Base on their track record, they have demonstrated the capabilities and know how to penetrate the Chinese market with great success and they are currently in the midst of replicating the success in more cities and provinces.

There will be problems along the way, there will be risks involve in any business but I am confident of weathering the storms together with best world’s management and team members and also not forgetting to enjoy the successes they will have along the way.

This company have demonstrated strong earning power based on their track record with a long runway for growth and being asset light with low capex to grow. Best world is also lead by capable and high problem solving management who are aligned to shareholders and company has a fortress-like, rock solid balance sheet.

For some people who feel that BWI is an illegal company, you might want to consider taking a short position like Ackman on Herbalife if you are so certain. Whats the point of all talk and no action right?

https://www.bloomberg.com/news/articles/...ium=social

Hi Value Explorer81,

Thanks for sharing the information from the investor dialogue session.

Although I am happy BW managed to once again increase its profitability, I cannot help but feel wary about its track record. In their FY2017 results, the revenue from Taiwan declined 28.5%  from $123.0 million in FY2016 to $88.0 million in FY2017, even though an explanation was given. However, the decline came after record breaking results in TW last year.

Back in Year2007/2008, Indonesia was also showing a lot of promise, but it ultimately did not end up well(reasons were also provided back then). (Ref : https://www.valuebuddies.com/thread-1033-page-11.html Post #102 for graphical view of revenue by countries - credit to Boon)

As BW has been in Tawiwan for several years and TW has been the strongest mkt for BW DS, I would think the mgmt has a good grasp of the TW market situation. Of course, nothing grows forever, but I have to admit I was caught by surprise by the size of TW decline.

As an investor, of course, I am hoping for the best in its China expansion. It has been an amazing run, by far my most successful (albeit unexpected) investment record - I am thankful everyday.

However, after covering several more China provinces this(and next) year and achieving peak revenues, what's the next mega market after China if the revenues cannot be sustained ? I cannot help but ponder whether the party may be coming to an end soon.
I was at the result briefing.

According to mgmt:
1. Disciplinary actions were taken on some misconducted/unethical Taiwan leaders, including sacking distributors.
2. The mgmt is actively looking at M&A, particularly for the Japan mkt. Japan is one of the major market as Japanese are receptive to MLM. Hope this answered dreamybear
3. Co is also looking at developing new products, incl beverages. Mgmt believes they can tap on her 490k strong members.
4. Current consumption per member per year is $703, which works out to be less than $60/mth. Mgmt believes there is still room for growth.

This is not a signal to buy or sell. I am just sharing facts provided by the mgmt. If you are interested in the company, please do your own due diligence.

(P/S I have a set of notes from the briefing, if anyone keen or want to discuss, please PM me)

Ha-ha ! Millionfaith, I believe these figures are not yours but they certainly need to be "dissected", don't you think ? 
 
490,000 members each consuming $ 703 per year  = SGD 344 million per year.
 
However, FY2017 revenue (including Export revenue) only came in at 220 million.

@Boon, nice to see you back and thanks for highlighting.

To answer your question on the figures, if you refer pg 7, it mentioned
1. Membership numbers is recorded as at 31st Dec 2017. Hence the number is tilted as the number grows from Q to Q.
2. The revenue from China is "measured" as DS price, not export price.

Finally, the revenue was taken from 4Q, rather than full year. As we are aware and you have also mentioned, 4Q export figure has been loaded up to avoid any transition (from export to DS) hiccups.

If we use 4Q revenue without adjusting for DS price, it works out to be about $600/yr/member, abt 14% difference.

Based on this, I can only assume the actual per member sales (esp for market outside China) is lower. On the other hand, the figure of 490k members comprised only a small % from China according to mgmt. Mgmt is unable to provide actual figure during the meeting but did mention to send us the market size report on China.

@holyimage, active members is about 8-9%. Over 90% are member-consumer. I am not familiar with BW marketing plan. However, some MLM marketing plans require yearly membership subscription renewal, for eg Amway, whereas others may require members to make minimum purchases within a year to qualify for membership in the following year. Hence I do not consider the member-consumer as dormant. Whether BW can tap on its existing members to increase sales on its current or new products, I don't know. But I will be happy if they explore this option and strategy for market penetration.
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The figures are YEARLY (or FULL YEAR) numbers, as clearly stated in the graph. Not 4Q numbers
 
DS revenue DECREASED from 142.308 m (in FY 2016) to 109.890 m (in FY2017), while DS membership INCREASED from 439,765 (in FY2016) to 490,041 (in FY2017). These should give rise to DECREASING “DS revenue per DS member” over the same period.
 
However, the graph shows an INCREASING “revenue per member” over the same period, from 639 to 703, which implies “revenue per member” as shown in the graph is NOT the same as “DS revenue per DS member”
 
The footnote says revenue includes China Equivalent DS revenue, converted from China export revenue, but does it mean
 
revenue per member = (DS revenue + China Equivalent DS revenue)/ DS members
 
OR
 
revenue per member = (DS revenue + China Equivalent DS revenue) / (DS members + China Equivalent DS members) ?
 
Neither makes sense to me because “export model” is not the same as “DS model”.
 
The management may know how to work out the “China Equivalent DS revenue” from the China export revenue but how do they work out the  “China Equivalent DS members” ? 
 
The short answer to that could well be the “China Equivalent DS members” is readily available simply because “the export model” is being run as a “DS model”…………………..Ha-ha!
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
Reply
(03-03-2018, 04:32 PM)dreamybear Wrote: Millionfaith, thank you for answering my question. Smile

On a separate note, BW seems to have been in Korea since Yr2011 but doesn't appear to have found meaningful success.

I also found some info from World Federation Direct Selling Association which shows Korea to be a much bigger market than Japan. (http://wfdsa.org/wp-content/uploads/2017...6-2017.pdf) Although Japan has a high standard of living, it is facing the challenge of a rapidly aging population which may affect their purchasing power.

As such, I am not sure whether expanding into Japan can bring about much revenue.

I may have missed it, but I think the mgmt did not update about the status of the Tuas factory which is mentioned to start operating by the end of FY2017, in the 2016 AR.

@dreamybear
 
Thanks for the link.
 
According to BW mgmt, BW competitors are not limited to direct selling companies and can be all mainstream products selling in stores. Hence, I suppose BW mgmt evaluate a market based on population, rather than size of DS.
 
Based on what I heard & my own interpretation regarding the Japan mkt, BW seems to try replicate her China strategy onto Japan mkt; M&A and leverage on a local partner network. I don’t know if this will work or not, every market is different, and that is where risk comes in. For me, I will look at the past record of the management, and also evaluate risk reward moving forward.
 
Indeed BW is in Korea. According to AR2013, in fact Korea membership is 6.8% vs the then Taiwan membership 3.9%. Taiwan has taken off, but not Korea…why? Culture differences? Other local challenges? Wrong strategy? I also like to understand further
 
Based on my experiences with MLM, in my opinion, MLM can be a fad, and hence revenue is volatile. Co needs to constantly run promotion, events and activities to sustain momentum. This is the downside of MLM business and investors need to accept when a certain market declines. Not every one has the stomach for it, hence do not lose sleep over it. There is no free lunch.
 
I prefer to focus on the product effectiveness as this is where I believe will build customer loyalty. I am planning to give the product a try after my existing products use up. It’s product line is simple but expensive.
 
Sg actress Felicia Chin on Dr Secret:
https://www.instagram.com/p/BRCtbzbFmPW/
 
On Taiwan show:
https://www.facebook.com/bwlAnnzhuo/vide...906283414/
 
On Tuas factory, if I am not mistaken, this factory has obtained Halal certification. On the side note, for competitors who do not have the facilities for Halal manufacturing, their products are still allowed to be sold in Indonesia just that the labels need to indicate non-halal. Whether the BW effort pays off or not, I don’t know. But I am happy to see mgmt commitment in the business
 
I have highlighted the above are MY own opinions, interpretation and biases. So please do your own due diligence.
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@Millionfaith, thanks for sharing your MLM experiences.

The effects of DR Secret as mentioned in the TW show looks impressive indeed - but I guess the downside is the number of pdts the show participant has to use to achieve that kind of effect. Maybe if you dun mind, can share your product experience in the future. Smile

On pg 4 of the report issued by KE on 27 Feb(https://factsetpdf.maybank-ke.com/PDF/83...71fe6e.pdf), it seems BW has broken into Top 10 in TW in Yr2016. However, its FY2017 China revenue of 110.5*4.8.(appr SGD-RMB x-chg rate) is only 1/4 of China's Top 19/20(Yr2015 ranking). Hopefully, once DS licences for DR Secret and for more provinces are granted, BW can catch up in due time !
Reply
(04-03-2018, 09:05 AM)Boon Wrote: The figures are YEARLY (or FULL YEAR) numbers, as clearly stated in the graph. Not 4Q numbers
 
DS revenue DECREASED from 142.308 m (in FY 2016) to 109.890 m (in FY2017), while DS membership INCREASED from 439,765 (in FY2016) to 490,041 (in FY2017). These should give rise to DECREASING “DS revenue per DS member” over the same period.
 
However, the graph shows an INCREASING “revenue per member” over the same period, from 639 to 703, which implies “revenue per member” as shown in the graph is NOT the same as “DS revenue per DS member”
 
The footnote says revenue includes China Equivalent DS revenue, converted from China export revenue, but does it mean
 
revenue per member = (DS revenue + China Equivalent DS revenue)/ DS members
 
OR
 
revenue per member = (DS revenue + China Equivalent DS revenue) / (DS members + China Equivalent DS members) ?
 
Neither makes sense to me because “export model” is not the same as “DS model”.
 
The management may know how to work out the “China Equivalent DS revenue” from the China export revenue but how do they work out the  “China Equivalent DS members” ? 
 
The short answer to that could well be the “China Equivalent DS members” is readily available simply because “the export model” is being run as a “DS model”…………………..Ha-ha!


Hello Boon,

Got this just for you : )

Hmm....I did not expect the big price gap between DS price and export price.

Response from BW:



The average revenue of S$703 per member was derived based on the following:

(Revenue from direct selling + export sales in china if it were to be recognised at direct selling prices) / Total number of members

 

Given a membership base of 490,041 members and revenue from direct selling of S$109.9 million, we are left with a balancing figure of approximately S$234.6 million.

 

This balancing figure refers to the Group’s China exports, adjusted for directing selling prices. Note that the export figures disclosed of S$106.5 million refers to the Group’s exports sold at export prices. The rationale for this adjustment is to take into account the ultimate scenario where BW’s Export business are fully converted into Direct selling.

 

[Image: cid:image001.png@01D3B494.DB477850]

Source: Best World’s FY2017 Results Announcement Section 8
Reply
(05-03-2018, 04:11 PM)Millionfaith Wrote:
(04-03-2018, 09:05 AM)Boon Wrote: The figures are YEARLY (or FULL YEAR) numbers, as clearly stated in the graph. Not 4Q numbers
 
DS revenue DECREASED from 142.308 m (in FY 2016) to 109.890 m (in FY2017), while DS membership INCREASED from 439,765 (in FY2016) to 490,041 (in FY2017). These should give rise to DECREASING “DS revenue per DS member” over the same period.
 
However, the graph shows an INCREASING “revenue per member” over the same period, from 639 to 703, which implies “revenue per member” as shown in the graph is NOT the same as “DS revenue per DS member”
 
The footnote says revenue incFludes China Equivalent DS revenue, converted from China export revenue, but does it mean
 
revenue per member = (DS revenue + China Equivalent DS revenue)/ DS members
 
OR
 
revenue per member = (DS revenue + China Equivalent DS revenue) / (DS members + China Equivalent DS members) ?
 
Neither makes sense to me because “export model” is not the same as “DS model”.
 
The management may know how to work out the “China Equivalent DS revenue” from the China export revenue but how do they work out the  “China Equivalent DS members” ? 
 
The short answer to that could well be the “China Equivalent DS members” is readily available simply because “the export model” is being run as a “DS model”…………………..Ha-ha!


Hello Boon,

Got this just for you : )

Hmm....I did not expect the big price gap between DS price and export price.

Response from BW:



The average revenue of S$703 per member was derived based on the following:

(Revenue from direct selling + export sales in china if it were to be recognised at direct selling prices) / Total number of members

 

Given a membership base of 490,041 members and revenue from direct selling of S$109.9 million, we are left with a balancing figure of approximately S$234.6 million.

 

This balancing figure refers to the Group’s China exports, adjusted for directing selling prices. Note that the export figures disclosed of S$106.5 million refers to the Group’s exports sold at export prices. The rationale for this adjustment is to take into account the ultimate scenario where BW’s Export business are fully converted into Direct selling.

 

[Image: cid:image001.png@01D3B494.DB477850]

Source: Best World’s FY2017 Results Announcement Section 8
Thanks millionfaith
 
FY2017:
DS revenue = 110 m
DS member = 490k
DS revenue / DS member = 224 per member
China export revenue = 106 m
 
Scenario A:
 
revenue per member = (DS revenue + China Equivalent DS revenue)/ DS members 
 

= (110 m + 106 m x F ) / 490 k = ( 110 m + 106 x 2.21 ) / 490 k = 703

OR


Scenario B:
 
revenue per member = (DS revenue + China Equivalent DS revenue) / (DS members + China Equivalent DS members)

 
= ( 110 m + 106 m x F ) / (490 k + G) = 703
 

____________________________________________________________________________________________________________
 
The numerator or revenue is easy to understand.
F = Factor to convert “export price” to “equivalent DS price”. = DS price / Export price.
The management knows the figure, we don’t.
 
The “confusing part” is the denominator or the membership
G = China Equivalent DS members.
 
Question remains: Is the 490 k inclusive of G already ?
 
If it is exclusive, scenario  B would make more sense, wouldn’t it ? Which implies F is greater than 2.21

In another words,

What is "Total number of members"  

490 k 

or 

( 490 k + G ) ?
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
Reply
(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
Reply
I attended BW AGM (30 Apr) and just wanted to share my personal thoughts with fellow BW shareholders. On the whole, I came back with positive feeling and information overload(given that I am neither a full fledged businessman nor accountant). I also learnt that doing business overseas is actually very very complicated.

In general, I find Dr Hoan friendly and approachable whereas Mr Huang really knows his stuff and readily welcomes shareholder engagement. One shareholder congratulated Dr Hoan(only Asian) for being appointed the Secretary of World Federation of Direct Selling Association(ref : pg 30 AR). The Association is hoping to work with the Chinese authorities to have China joining as a country member.

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.

My AGM notes(also included relevant page in Annual Rpt 2017(AR) for background info) :

1. Japan / Korea – not easy to break into their markets because they already have very strong local skincare products and their population support their own products. Nevertheless, mgmt is still considering possibilities.

2. Middle-East – bridge to India market in future as a possibility

3. Indonesia – trying to shift current distributors to skincare products, intend to apply for Halal certification once SG factory operational and hopefully, sales will pick up (ref : pg10 AR)

4. Taiwan - more or less peaked after growing strongly in recent years, the key is to maintain existing sales level. In fact, it was mentioned in the AGM that BW’s TW position dropped from 9 to 12 in Year 2017.

5. China – Moving forward(2Q2018), BW will be replacing export agent model with China wholesale model(ref : pg12 AR) i.e. BWCP(BW subsidiary) > Experience Center(EC) or stores > End Customer. As part of regulations, BW needs to setup 1 EC per district in order to be able to sell its products. So far, BW has about 40 EC in various districts in 9 provinces, and is working on 5 other provinces. These ECs were converted from existing hair salons, etc.
It was also clarified that China distributor titles(platinum, etc) are given based on sales volume.

6. The primary objective of the SG Tuas manufacturing facility is not about cost savings, but rather quality control, shorter lead time, govt support. Target to be operational next year.

Pls DOD and feel free to correct me if I had recorded anything wrongly.
Reply
(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?
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
Reply
(01-05-2018, 12:33 AM)dreamybear Wrote: I attended BW AGM (30 Apr) and just wanted to share my personal thoughts with fellow BW shareholders. On the whole, I came back with positive feeling and information overload(given that I am neither a full fledged businessman nor accountant). I also learnt that doing business overseas is actually very very complicated.

In general, I find Dr Hoan friendly and approachable whereas Mr Huang really knows his stuff and readily welcomes shareholder engagement. One shareholder congratulated Dr Hoan(only Asian) for being appointed the Secretary of World Federation of Direct Selling Association(ref : pg 30 AR). The Association is hoping to work with the Chinese authorities to have China joining as a country member.

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.

My AGM notes(also included relevant page in Annual Rpt 2017(AR) for background info) :

1. Japan / Korea – not easy to break into their markets because they already have very strong local skincare products and their population support their own products. Nevertheless, mgmt is still considering possibilities.

2. Middle-East – bridge to India market in future as a possibility

3. Indonesia – trying to shift current distributors to skincare products, intend to apply for Halal certification once SG factory operational and hopefully, sales will pick up (ref : pg10 AR)

4. Taiwan - more or less peaked after growing strongly in recent years, the key is to maintain existing sales level. In fact, it was mentioned in the AGM that BW’s TW position dropped from 9 to 12 in Year 2017.

5. China – Moving forward(2Q2018), BW will be replacing export agent model with China wholesale model(ref : pg12 AR) i.e. BWCP(BW subsidiary) > Experience Center(EC) or stores > End Customer. As part of regulations, BW needs to setup 1 EC per district in order to be able to sell its products. So far, BW has about 40 EC in various districts in 9 provinces, and is working on 5 other provinces. These ECs were converted from existing hair salons, etc.
It was also clarified that China distributor titles(platinum, etc) are given based on sales volume.

6. The primary objective of the SG Tuas manufacturing facility is not about cost savings, but rather quality control, shorter lead time, govt support. Target to be operational next year.  

Pls DOD and feel free to correct me if I had recorded anything wrongly.

"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 ?
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
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