$Best World(CGN.SI)

Muddy Waters has issued a SELL call on China's Anta Sportswear over the weekend.

Indeed, Anta has been able to enjoy a much longer lifespan (as a listed company) than former S-chip China Hongxing. In the end, however, it may also succumb to the fraud disease so prevalent among China companies. It is almost like a culture, a way of life (systemically perpetuated by the Chinese Communist Party and infected almost the entire population).

In the report, Muddy Waters wrote:
"..... Investors cannot rely upon ANTA’s financials. We believe that ANTA posts industry-leading operating margins not because it’s so well operated; but, rather because ANTA uses numerous secretly controlled Tier 1 distributors to fraudulently boost its margins.

We have “Smoking Gun” evidence that ANTA secretly controls a material number of its distributors. In this report, we present documentary evidence that ANTA secretly controls 27 distributors. At least 25 of these of these appear to be Tier 1 distributors. The total number of Tier 1 distributors ANTA controls could be over 40 of the approximately 46 the company has. The secretly controlled distributors collectively appear to account for approximately 70% of ANTA brand sales.

ANTA resolutely claims that its Tier 1 distributors are independent third parties. This is a lie. The fact that ANTA controls its Tier 1 distributors is well-known among senior ANTA executives. ANTA’s senior executives know that ANTA conceals its control of the distributors by using proxy owners. However, this notion of independent distributors is such a charade that ANTA’s senior executives frequently refer to the distributors as “subsidiaries”.[3] We believe ANTA controls these subsidiaries in order to manipulate its reported financials......."

Does it ring a bell?
That's why I believe (I'll let the investigators prove) Best World's distributorship operations follow a similar model, used to inflate revenues figures without actually having sold the products to end users. While we can say that whether the distributors can sell to consumers is their problem as the distributors have already "bought" the products from Best World, it gets murky and complicated when distributors are closely related to producer.......

$Best World(CGN.SI)

Very interesting investigative work here:

https://valiantvarriors.wixsite.com/home/n...

In the definition of the Laws, Bestworld was probably not wrong to state that the franchisee/importer was not related to BWL.

BUT, if the article's findings are true (brother in law relation etc), then effectively the PEOPLE in Bestworld and its main franchisee/importer ARE CLOSELY related. This gives rise to possibility of hanky panky transactions etc (I am not saying surely hanky panky, but "possibility" unless proven otherwise) .

$Best World(CGN.SI)

So, company requested for a trading halt after SGX made a query on the trading activities.
The company is likely to refute the Bonitas Research report.
But I note that Bonitas is just one of several research house /investors to have checked on the BWL Lifestyle centres in China and all reported that these centres were merely empty store fronts with little or no sales activities. They also checked around and concluded that brand awareness for DR's Secret skin care products were very poor, definitely not enough to be able to record the sales that BW claimed.

Tellingly, Bonitas highlighted that BW's founders have exponentially accelerated their annual take home pay by a whopping 20x in 5 years. The figures were also a huge percentage of the company's operating cash flows.

Interestingly, all this while, the 2 founders are being addressed as "Dr Hoan" and "Dr Tan"....both proudly listed they have obtained PhD degrees - from "Western Pacific University, USA" and "Canyon College, USA" - respectively.

But an internet search suggests that both these institutions are either non-existent or have been found to be unaccredited or just a degree certificate printer.

https://www.idahopress.com/members/online-...

People who use such dubious sources to claim a "PhD" title and thus be addressed as "Dr" are very likely to be using the titles to give others a FALSE impression of their intelligence and credibility, and to hide other wrongdoings. Such an action alone casts real doubt on the INTEGRITY of the founders.

So over the years, how many people have addressed them as "Dr Dorothy Hoan" and "Dr Doreen Tan"? Hahahahahahahaha..............hahahahahahahahaha

$Best World(CGN.SI)

CLSA's investigative report on BestWorld yesterday revealed some very telling evidence.

The way I see it, Best World's model in China isn't exactly a typical network marketing one. In a network marketing model (such as Amway, Unicity), company products are primarily distributed directly to individuals, who in turn become a node to form their own distribution network to other individuals.

But in Best World's case, company products are distributed to distributors which act more like wholesalers holding up the stocks. It is up to the distributors how they want to sell the products. It is a pseudo franchise-network marketing model.

When distributors buy products from Best World in bulk, Best World records revenues. That results in very high revenues and growth. But it doesn't mean the products will be consumed by end users. Chances are there is an increasing stockpile at the distributors. Chances are there are clauses in their contracts for distributors to return unsold goods to Best World.

As pointed out by the CLSA report, there is a risk for Best World to repeat its boom-bust cycle, previously in Indonesia and Taiwan. The initial years see very good revenues and profits growth. But the numbers soon collapse when distributors stop buying, return stocks etc.

Despite having fallen from $2.60 recently, I believe there is more downside in the short term. Interestingly, CLSA made a sell call but revised its target price sharply higher from $1.29 to $1.75. This is primarily due to expectation for good 2019 result.

My view is that it will head to $1.50 this round.

$Best World(CGN.SI)

Another RUMOR that has been going round for some time is this:

BW had asked franchisees in China to buy their shares. Those who bought above a certain amounts would get good credit terms, "case by case" basis. So, instead of paying BW for the products in cash, the Chinese franchisees used the funds to buy BW shares. This could be one reason to explain for the meteoric rise in BW shares over the past 3 years. Demand for BW shares overwhelmed supply.

If the above rumor is true, imagine what happens when things go wrong (like now!) and there is a rush for the exit door. A stampede!

Nevertheless, I wanna emphasize that the above scenario is just a market RUMOR. Not substantiated. Not a fact yet. I just wanna share what I heard.