Best World

[Shiyi]

Hi,

Yes the equal access scheme is there and will be tabled as an item for the upcoming AGM. However, I am unsure if there will be massive votes for/against this resolution. It is obvious there are enough shares out there who wants to cash out of Best World, so they may fight for a wording that does not allow Best World to underprice them at 1.36. If there are sufficient "against", the EAO will not materialize.

It is no doubt a good company, but the structure is against minority investors. The controlling shareholders are contented with not giving dividends to shareholders. As seen by their remuneration package, they are content to each draw about $12 million in cash, for reference DBS Piyush is only earning $13.8 million. The salary drawn by the top 3 shareholders amounts to 20% of the company's profits and they have more than doubled their own pay since they stopped giving out dividends.

In a way, they have been able to enjoy the same amount of cash inflow by moving it from declaring as dividends to increasing their pay. Its a red flag

The company has suspended dividends for three years for "prudence" reason. And yet the total package for the two controlling shareholders has spiked over the years. Of the package, 92% are attributed to bonus. 
IDs have a lot to explain about the differentiated treatment.

[dreamybear]

IDs have a lot to explain about the differentiated treatment.

I think it's a bit difficult to ask them to explain in the absence of a in-person AGM.

In any case, I suppose it's more or less a "lost cause" for shareholders. Regardless of the profitability and the number of years waiting, it is likely that the amt shareholders can get back in the interim is the EAO price.

Given the good EAO response(even at $1.36 per share), there is a high chance of crossing the 90% acceptance in the event of a delisting offer down the road. After the EAO(s)*, some shareholders may also be stuck with "neither here nor there type of qty" lots and feel might as well just accept and move on.

*I also think there is likely going to be more than 1 round

I agree the financial results shd continue to be good, but whether we can continue to see the spectacular growth rates is another thing. All good things come to an end one day.

In the Q&A below, the word used is "suspended", and I am not optimistic of resuming(at least in the foreseeable future), especially when it seems to me that the Chinese govt is tightening regulations whether in the tech space, etc.

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

http://english.mofcom.gov.cn/article/pre...0233.shtml

[CY09]

Hi Dreamybear,

Yes you are right. The company has announced that it does not see that it will be unsuspended soon in its below announcements. They are looking for ways of a delisting or avenue for shareholders to realize value such as EAO or total delisting. So shareholders are now held captive by BW board.

https://links.sgx.com/FileOpen/2021%2011...eID=690473

While the company and advocates could have said the reason for no dividends and an offer of $1.36 is for prudence. The actions of the the 3 EDs of their pay tells a different story (there is no prudence). From the annual reports of AR 2018 vs AR 2020, the remuneration of the 3 executive directors have risen from s$12 million to s$32 million. As a proportion of the group's net profits, it was 18.6% and 23.7% for FY2018 and FY 2020 respectively. It shows their pay is growing faster than profit growth.

I don't have a solution for existing shareholders who are stuck, however, I think you will need an investor advocacy group to step in or appeal to SGX regco as shareholders. Other valuebuddies could weigh in with their experience on how minority shareholders could appeal to the board/IDs in giving them avenues to realize the value of their stake via a fair EAO or delisting offer.

[¯|_(ツ)_/¯]

解铃还须系铃人

The loop on the neck was tied by SGX - which was based on BWL's vision/mission - specifically for China.

Of course, the correct way is for SGX to U-turn and release the tie and granted BWL trading status.  This is obvious.

What is not obvious is what would caused SGX to release the tie?
Shareholder wrote in to SGX - might work.

A better way, would be BWL clearly communicate it's vision/mission for China.  Does it still wanted to pursuit the DS route? If not, then what would be it's operating model in China?  Once this is communicated (clearly) and based on the new changes, BWL is no longer bounded by it's previous vision/mission and hence, something could be done.

https://www.bestworld.com.sg/publication...china.html


Gratitude.

[Shiyi]

解铃还须系铃人

The loop on the neck was tied by SGX - which was based on BWL's vision/mission - specifically for China.

Of course, the correct way is for SGX to U-turn and release the tie and granted BWL trading status.  This is obvious.

What is not obvious is what would caused SGX to release the tie?
Shareholder wrote in to SGX - might work.

A better way, would be BWL clearly communicate it's vision/mission for China.  Does it still wanted to pursuit the DS route? If not, then what would be it's operating model in China?  Once this is communicated (clearly) and based on the new changes, BWL is no longer bounded by it's previous vision/mission and hence, something could be done.

https://www.bestworld.com.sg/publication...china.html


Gratitude.

The 系铃人 is Best World itself, not SGX.
Best World has been doing "direct selling" in China without a full license. For SGX to allow it to resume trading, it has to get the license.

This makes sense as a large portion of Best World revenue comes from China. Should the Chinese authorities get tough on the license, Best World would be in trouble both legally and financially.

[dreamybear]

Just wondering .... Assuming after several rounds of EAO were conducted : Since there is no trading market and if a lot of shares were successfully bought back at EAO price of $1.36, could $1.36 be "justified as fair" for a G.O. price, on the premise of recent transacted volume ?

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

Responses to questions EGM 7 Apr 2022
https://links.sgx.com/FileOpen/7%20April...eID=709263

Q (ii) The last share buyback price was SGD 1.36 per share. Is this the implied fair value per share of the company?
A (ii) To establish an independent view of the fair value per share, an Independent Financial Adviser (“IFA”) would need to be appointed. This would be an expensive and time-consuming process and we are guided that, in the absence of a trading market for the shares for a long period of time, it would be challenging to establish the fair market value per share........ (emphasis added)

[¯|_(ツ)_/¯]

My take is bwl unlikely wanted to be de-list.
As per the latest QnA, the EAO exercise is to give a chance for those shareholders wanted out and so the buyback should continue.

解铃还须系铃人

Let's see how it goes



Gratitude.

[CY09]

The owners are okay to draw a pay that is growing in faster than Profit growth, resulting in a higher proportion of pay to profits

While I understand the phrasing in line with industry, it is an iffy phrase. Herbalife's CEOs remuneration is lower than each of the chairwomen's remuneration. So i guess BWL has some internal comparison benchmark which does not compare with other listed direct seller.

Secondly, BWL is contented to keep doing EAO at this low price with their own internal resources.

If minority shareholders want further appreciation of their stake, the only way is to ask SGX regco to unsuspend BWL. Otherwise, the mgmt would do what they are doing now

In my view, its a good business but the owners are not sharing the wealth with minority. Hence I am not sure why it should even be listed if such acts are condoned, similar to Hong Fok

[Shiyi]

The owners are okay to draw a pay that is growing in faster than Profit growth, resulting in a higher proportion of pay to profits

While I understand the phrasing in line with industry, it is an iffy phrase. Herbalife's CEOs remuneration is lower than each of the chairwomen's remuneration. So i guess BWL has some internal comparison benchmark which does not compare with other listed direct seller.

Secondly, BWL is contented to keep doing EAO at this low price with their own internal resources.

If minority shareholders want further appreciation of their stake, the only way is to ask SGX regco to unsuspend BWL. Otherwise, the mgmt would do what they are doing now

In my view, its a good business but the owners are not sharing the wealth with minority. Hence I am not sure why it should even be listed if such acts are condoned, similar to Hong Fok

The two founders and controlling shareholders each received $12.5 million. In comparison, UOB CEO was paid $10.8 million. 

In terms of market cap, revenues and profits, Best World is much smaller than UOB. Not sure what "market rate" the remuneration committee of Best World used in determining the number.

[CY09]

To me, its a company with very bad corporate governance.

Unfortunately, it only showed its horns when SGX suspended it.