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Best World co-founders Hoan and Tan buy shares amid independent review

Chan Chao Peh
Chan Chao Peh • 3 min read
Best World co-founders Hoan and Tan buy shares amid independent review
SINGAPORE (Apr 22): Beauty and health product seller Best World International has bought back shares in recent weeks as it awaits the findings of an independent review initiated last month to address questions over its business operations in China, its ne
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SINGAPORE (Apr 22): Beauty and health product seller Best World International has bought back shares in recent weeks as it awaits the findings of an independent review initiated last month to address questions over its business operations in China, its new high-growth market.

Two of the company’s controlling shareholders, co-chairmen and co-founders Dora Hoan and Doreen Tan, have bought shares in their personal capacities as well. Even so, the company’s share price continued its downtrend.

The current round of share buybacks commenced on April 9, when the company bought back 115,000 shares at between $1.98 and $2.01 each. On April 11, it paid between $1.92 and $1.97 each for another 100,000 shares. The following day, Best World’s share price continued to fall and the company bought back 30,000 shares at between $1.77 and $1.78.

On April 15, the company bought 75,000 shares at between $1.77 and $1.78 each. With the purchases on April 15, the quantum of Best World’s treasury shares increased to 5,376,900 shares. Excluding treasury shares, the company has a share base of just over 549 million.

As for the purchases of Best World’s two key directors, both bought 50,000 shares each. Hoan, who is also the company’s group CEO and managing director, paid $100,000, or $2 each, on April 9; Tan, who is also the company’s president, bought at a slightly lower price of $1.98 each the next day.

Hoan’s direct stake is now about 5.9%, or 32.33 million shares, while Tan’s is about 5.7%, or 31.38 million shares. The bulk of their shareholdings in Best World are held via a 50:50 entity called D2 Investments, which owns nearly 192.8 million shares. Hoan has a total direct and deemed stake of 41.0255%, while Tan’s is 40.8611%.

It had been nearly a year since Best World’s and the two co-founders’ previous purchases from the market. The company last paid between $1.23 and $1.30 each for 75,000 shares on June 25, 2018. Tan last bought on May 18, paying an average of $1.255 for 100,000 shares; Hoan last bought an equal number of shares on June 21, paying $1.21 apiece for them.

Following the recent purchases on April 15, 2019, Best World’s share price dropped even more to $1.69 the next day. However, it surged 15 cents to close at $1.84 on April 17. From its recent peak of $3.30 on Feb 11, Best World’s share price has dropped as much as 44%. At this level, the company is valued at 13.87 times historical earnings, giving it a market capitalisation of $1.01 billion.

One Feb 18, Best World was the subject of a Business Times report that questioned the franchise model that has helped drive growth in China. The company on Feb 23 clarified the questions raised, but Best World’s share price continued dropping.

On Feb 26, Best World reported that earnings for FY2018 ended Dec 31 increased 30.9% over FY2017, hitting $72.9 million. Revenue in the same period rose 24% y-o-y to $266.3 million. Huang Ban Chin, Best World’s group chief operating officer, says the company expects better revenue and earnings for FY2019, with stronger contributions from its China business.

On March 19, Best World announced that it had appointed PricewaterhouseCoopers to conduct an independent review that includes site visits to the business locations of the franchisees to verify their existence; validating sales to significant franchisees; and conducting targeted reviews on the sales and purchase records of the franchisees. PwC auditors will also be tasked with reviewing the physical flow of inventory to franchisees; performing stock takes on inventories of franchisees on a sample basis; reviewing internal controls surrounding sales to franchisees and recommending improvements. PwC’s findings will be reported directly to Best World’s audit committee and SGX RegCo.

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