Q&A content shared by a reader, Chirpy.
Shareholder: Management needs to clearly lay out the use for cash for share buy backs and dividends and not give a general answer.
Huang Ban Chin: Basically at this point in time, the cash, the funds that are actually with the company is reserved for the operating cash for our company and also for the other purposes like new markets expansion and also expenditures in relation to our production capabilities and also because of the number of regional centers that we have in the different regions of the world, I think typically we need to set up at least two to three, or refurbish two to three, new regional centres in a year.
Of course the remaining cash is also reserved for the current M&A obligations and also to be able to capitalize on any M&A opportunities should they arise.
Best World market cap: S$948 m*
Cash balance: S$485 m**
* as at 28 April 2023
Shareholder: No dividends were declared for the past few years. How does Mr Adrian Chan intend to help minority shareholders’ interests moving forward?
Adrian Chan: I know it's a concern for shareholders about the issue of dividends and the board has debated this at length not just recently but over the last few years -- the use of cash, what corporate exercises we are contemplating... these are serious issues that I think don't just fall on my shoulders but on everyone's shoulders to really look at what's in the long-term best interest of the company. We are taking a long-term view of this issue and trying to balance the interests of all shareholders now and in the future as well as the company's needs.
I know that this is sort of a general reply that will not satisfy those shareholders who want a more detailed response but obviously we can't reveal too much of the details that go on in board discussions behind closed doors. I like to assure shareholders that all of us take this issue of use of cash, deployment of cash for dividends or share buybacks -- and it's a constant tension and tussle between these differing needs and the needs of the company for the future. We always put the company's interests above everyone else and we continue to balance these interests, so what is decided for one financial year may not necessarily apply for the next. Circumstances and the volatile external macro economic environment is changing all the time. You know there is some impetus to conserve cash in this high interest rate environment so we will continue to look at this issue and try to make our reasons a bit clearer maybe in the future once we make a decision one way or the other.
Huang Ban Chin: If I may add, the approach that we are adopting at this point is one that is very conservative and I think it has actually served us well especially if we were to look back what has happened to us since 2019 up to the point that there's a lifting of the trading of our shares late last year. It is exactly this conservative approach that has helped us because during that period of time it may not be made known to a lot of shareholders or all of the shareholders but at that point in time while our business was growing the key challenge was that there was zero form of financing that we were able to attain during that point in time and all lines were cancelled from the company.
The exact reason why we were able to tide through those very difficult times besides the support coming from shareholders is the fact that we have a very conservative approach to how we deploy our funds and hence we were able to tide through not only smoothly but emerge also stronger and more experienced. I hope that answers the question to a certain extent and sharing Mr Adrian Chan's view that you know we may not necessarily be able to answer you in a very clear and concise manner, but I believe you understand there are reasons why we can't divulge too much on this.
* Mr Adrian Chan is a Senior Partner at the law firm, Lee & Lee, and is Head of the Corporate Department of the firm. He is also:
|• member of the Legal Service Commission, which has jurisdiction over all officers in the Singapore Legal Service.
• a Board member of the Accounting and Corporate Regulatory Authority of Singapore.
• a Council member of the Law Society of Singapore and chairs its Corporate Practice Committee.
• Chairman of the Panel of the Institute of Corporate Law at ACRA.
• lead independent director of Yoma Strategic Holdings, AEM Holdings and Global Investments.
For more on him, click here.
A question was asked and answered in Best World's filing on the SGX website ahead of the AGM. Click here.
"The nature of the Company’s business is not capital intensive (e.g., vs property developers) and the Tuas factory is also completed. Based on 435m outstanding shares, using a $0.05 dividend (EPS $0.288) as an example, it would cost BW only about $21.7m, which is less than 5% of BW’s cash holdings. A lower dividend would cost the company even less and BW’s inherent cash flow generation abilities even in uncertain operating conditions should be able to comfortably afford a minimal dividend payout, while maintaining a fortress balance sheet. Historically, BW’s dividend payout ratio is about 40%. Can the Board help shareholders better understand the current situation?"