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Why are traders talking about Best World?

SINGAPORE — Earlier this week, the Singapore Exchange (SGX) called for an independent review of cosmetics firm Best World, amid reports that the firm was operating fraudulent schemes.

Founded in 1990 and listed on the SGX in 2004, Best World develops various health and wellness products, distributing them across 11 markets in Asia and the Middle East.

Founded in 1990 and listed on the SGX in 2004, Best World develops various health and wellness products, distributing them across 11 markets in Asia and the Middle East.

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SINGAPORE — Earlier this week, the Singapore Exchange (SGX) called for an independent review of cosmetics firm Best World, amid reports that the firm was operating fraudulent schemes.

But even before the company halted trading in its stocks on Wednesday, it has been a topic of discussion among the local investing community for several months.

TODAY takes a look at what is known about the company, and why it has been in the spotlight lately.

WHAT IS BEST WORLD?

Founded in 1990 and listed on the SGX in 2004, Best World develops various health and wellness products, distributing them across 11 markets in Asia and the Middle East.

These include supplement brand Avance, skincare range DR’s Secret, and weight management product Optrimax.

Best World also manufactures and distributes a line of supplements under the Aurigen brand, through franchisees in China.

WHAT HAPPENED?

The story goes back to 2016, when Best World’s stock embarked on a meteoric rise, surging from just 33.5 cents at the start of that year, to S$1.35 by June, making it one of the best performing stocks on the bourse.

In those six months, an average of 1.8 million Best World shares were traded daily, pushing Best World to a market capitalisation of S$303 million. This was a big jump — in the six months before that, the stock’s average daily volume was 486,863.

The spike in the stock’s volume and sharp increase in its price triggered several queries from the SGX, asking the company if it was aware of any possible reason for the unusual trading activity. Each time, the company said it was not.

In February this year, The Business Times looked into the company’s business, detailing, for example, how in China, where Best World sells its products through a “social selling” model, its retail locations are difficult for consumers to track down.

In response, Best World told shareholders that it had conducted its business ethically and in compliance with applicable laws. But it also acknowledged that it had limited oversight and responsibility over its franchisees, and hired PwC to conduct an independent review on its franchise model in China.

But the damage was done. After the report, Best World shares plunged as much as 25.8 per cent.

On April 17, however, the stock recovered some ground as Best World gave an interim update on the PwC review, saying it had not identified any matters that could affect their unaudited financial statements.

Then on Tuesday, short-seller Bonitas Research published a report on Best World with the damning first line: “We believe that Best World is a fraud and that its Chinese sales are a fraction of what was reported to shareholders.”

Besides questioning the authenticity of Best World’s profit books, it also claimed that the founders of the company pocketed millions from alleged fraudulent schemes.

“As reward for their fraudulent scheme, Best World’s founders (the “Dora’s”) exponentially accelerated their combined annual take home pay by 20x in five years, earning less than S$ 2 million in 2013 to receiving S$ 40+ million in cash in 2018!” said the report.

Shares fell as much as 11 per cent. When trading was halted at 11.25am on Wednesday, its stock was down to S$1.62.

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