SINGAPORE (Feb 25): Shares in Best World International have plunged as much as 58 cents, or 21.4%, to $2.13 upon opening this morning on news that the group would be conducting an independent review on its business and accounting practices.

The counter resumed trading this morning from an extended trading halt which it called for on Feb 18, prompted by an article published by The Business Times on the same date.

Titled Sales of DR’s Secret in China: Best World’s best-kept secret?, the article implied, among other issues, secrecy over Best World’s 28 franchisees as it claimed the company’s director and chief operating officer Huang Ban Chin had denied to disclose the franchisees’ names and exact store locations, which were then not listed on its website.

In its response on Saturday, Best World says Huang’s refusal to disclose franchisee-related information at the time was “to avoid selective disclosure of information” ahead of the company’s release of its FY18 results.

The group says it has since listed the address of its BWL Lifestyle Centres operated by franchisees on its website, adding that the company has engaged its internal controls consultant to conduct physical inspections of all 10 of these BWL Lifestyle Centres operated by franchisees.

BT also raised concerns over Best World’s direct selling license in China, which the paper claimed to cover only six health supplements under the Aurigen brand and no skincare products, contrary to information provided in analyst reports.

On this note, Best World clarified that its direct selling license covers only “certain health supplement products over a limited geographical space in China”, and not its Dr’s Secret skincare line of products, which is distributed under its franchise model.

A chart illustrating Best World's distribution channels in its Feb 23 clarification announcement filed to the SGX

The group also adds that it has confirmed with its legal counsel that the operation of its franchise model is lawful as it has obtained all material licenses for conducting its operations in China, and that its businesses under the export and franchise models do not constitute direct selling activities in China.

In its Feb 18 article, BT said a spokesperson from market research firm Euromonitor “expressed surprise” when shown Best World’s league table from its latest corporate presentation, which cited Euromonitor data to back the group’s claims of being the 13th largest company in China’s premium skincare market.

Best World says in its response that its ranking was ascertained after conducting additional market information and industry data obtained by the firm through ‘customised research’ which it engaged Euromonitor to perform – including primary and secondary research, as well as a review of the company’s audited financials and operating data.

It adds that Euromonitor has confirmed the validity of this statement with Best World, and intends to do the same with BT.

“The company would like to assure its shareholders that it has conducted all areas of its business ethically and in compliance with applicable laws and accounting standards, and is confident that the business and accounting practices of the group will stand up to scrutiny,” says Best World. 

Upon completion of the independent review, the company intends to publish and report its findings to its audit committee as well as to SGX RegCo.

Click here to view the full statement by Best World.