Understand within the investing community, there has been angst due to unfriendly investor action by Best World international where it had increased remuneration to the CEO and executive directors, stopped dividends to shareholders and yet the company is recording record profits. And sgx action of suspending the company due to its doubtful business model has rendered minority shareholders unable to realise value.
Minority shareholders are currently organising their online petition to regulators
Below is a letter that is sent to the regulator to review their action:
To SGX Regco,
I would like to flag one company by the name of Best World International. I am not a shareholder but am writing in the interest of investor protection/rights and urge SGX regco to take action.
The company has been suspended by SGX as SGX did not feel comfortable with its business model in China. While the company made efforts to pay its shareholders during its first few years of suspension, Best World has since stopped paying dividends to its shareholders. This despite the company recording record net profits and growing amount of cash generated. On the contrary, over the past 2 years, remuneration to its executive directors has been generous. For example co-chairman, Group Ceo, Dora Hoan has received an increase in remuneration from $4.75million (AR 2018) to $12.25 million.(AR 2020)
Best World audited results shows business is cash flow generative and they do not have an urgent need for cash because the Tuas plant is fully built with minimal CAPEX outlay and a net cash position of $390 Million with no debt as of 1HFY2021.
I understand it was SGX who suspended the company, however, the company has used this opportunity to increase remuneration to executive directors and not pay dividends to shareholders.
Existing shareholders are not able to realise the value of their shares of this profitable company due to no dividends received; while at the same time, the executive directors are increasing their remuneration through increased bonuses.
With the licenses of direct selling in China being unlikely to be granted to Best World International within these 2 years (thus allowing them to be unsuspended), I urge SGX regulators to consider two approaches to help public minority shareholders: (i) Direct the executive directors who are majority shareholders to offer a fair takeover price for the remaining shares or (ii) SGX regco allows the company to be unsuspended this year.
For (i), Best World is highly profitable and it is definitely possible to do a leveraged buyout. Best World net profits are $134 million with cash flow generated of $125 million (accounting for working capital changes and cash outflow due to investing activities/taxes). With the directors holding a majority stake of 50%, it is inconceivable that no banks/funds will lend them s$500 million to buy off the remaining public float stake; unless the audited results are fraudulent. The company can even tap on its cash reserves of s$390 million to buy off the remaining 50% stake in a leveraged buyout situation.
I look forward to SGX Regco actions towards this company. Thank you.