Excerpts from Maybank Kim Eng report
Analyst: John Cheong
BEST’s share price has underperformed peers
This could be due to higher dependency of BEST on China where c.50% of sales are from China vs Herbalife (19%), Nu Skin (36%) and Usana (4%).  Chief operating officer Huang Ban Chin. NextInsight file photoQ&A with management1. What is the impact from the Chinese government’s crackdown on pyramid schemes on your China operations? We do not expect any impact as our business is not a pyramid scheme. We highlighted in our response to the Bloomberg article the distinctions between a pyramid scheme and direct selling. Moreover, we are still operating under an export model and have notified the local authorities of all of our activities. More importantly, the crackdown should not impact licensed direct sellers who are running their business in a proper manner. The campaign aims to crack down on the illegal investment-related schemes and recruitment websites. 2. Will you consider delaying the conversion of your current export business model into direct selling model? What are the key differences between both models? We will not delay the conversion process. The key difference between the two models is accounting recognition of revenue and commissions. However, there will be minimal earnings impact. For the business operations, there will also be minimal impact. The reason why we spent so much time and resources to secure the direct selling licence in China is to raise our profile and to prevent regulatory issues as we are a direct-selling company outside of China. Our key success factor in China is our product strength. 3. What are your plans to regain investors’ confidence, after the major correction in your share price? For starters, the company, founders and directors have bought back shares in the open market since the share price correction. Also, we will be writing to the World Federation of Direct Selling Association to request it to issue a clarification that China’s crackdown is aimed at pyramid schemes, and not the licensed direct sellers. More importantly, we will continue to deliver a consistent set of results, particularly for our China operations. |
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Full report here.
