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Best World gets SGX RegCo nod to hold AGM by June 30

BEST World International - the fresh target of a shortseller that probed the accounting behind the skincare product seller's profits and its sales practices - has been granted approval by the Singapore Exchange's (SGX) regulatory arm to get more time to hold its annual general meeting (AGM).

In a regulatory filing put out on Saturday, Best World said SGX RegCo has no objection to its application for a two-month extension till June 30, 2019 for the company to convene the AGM. Best World will also have until June 16, 2019, to issue its annual report to shareholders. 

The two-month extension is meant to accommodate the completion of the independent review on Best World by PwC, according to Best World's earlier announcements. 

Best World had hired PwC to assess the franchise model that it adopted in China last year. According to Best World's announcement on April 17 this year, the review is to be completed by June 2019. Since this is a condition behind the waiver approval, Best World must update shareholders if the review report is not completed by the deadline.

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"As announced by the company on April 17, 2019, the company had made the application for the waiver as the board believes that the objective of the review would be better achieved if the AGM is postponed until the independent reviewer completes the review and the executive summary of its key findings have been announced on SGXNet," said Best World.

"This would enable the company’s shareholders to have more information on the franchise model and to clarify any questions that they may have at the AGM."

Best World is also seeking approval from the Accounting and Corporate Regulatory Authority for more time to hold the AGM.

SGX RegCo had separately on April 25 this year ordered a review of Best World's business in China. The aim is to address all matters raised in a shortseller report issued that day; the report led to a heavy sell-down on the shares on April 25.

The reviewer will report directly to SGX RegCo and the company's audit committee. 

In a 28-page report, the shortseller Bonitas Research said it doubted that Best World's main customer in China in 2017 was an independent party, though Bonitas was unable to establish a formal link between the customer and Best World management.

Bonitas referred to the BT report published on Feb 18, headlined "Sales of DR's Secret in China: Best World's best-kept secret?". Best World sells its DR's Secret line of skincare products in China, the firm's biggest market.

In it, BT had questioned how realistic Best World's China sales numbers are, as they did not match its low popularity and presence on online platforms such as Dazhong Dianping, China's biggest review and ratings app, and Taobao, China's biggest e-commerce app.

After the report was published, Bonitas found a spike in online review counts and transaction history for DR's Secret online vendors on both JD.com and Taobao.com.

It questioned whether the reviews were authentic: "Not only did we find repetitive/sequential reviews from the same accounts ... but also calculated a six times acceleration in the number of reviews generated after, versus before, the BT article was published."

BT noted in February that Best World's retail locations in China are exceptionally hard for consumers to track down. In China, the goods are sold through 33 franchisees under a "social selling" model. Initially, Best World declined to disclose the locations of its Chinese franchisees. After the BT report was published, Best World listed the addresses of 33 BWL Lifestyle Centres on its website.

Bonitas said it visited 12 Best World-linked outlets in China, and that employees at those centres did not seem used to dealing with walk-in customers.

The shortseller also highlighted that Best World's products were priced higher than other luxury brands; it was second only to Chanel.

Trading in shares of Best World has been halted since April 24. Based on the latest extension granted by SGX on April 27, the trading halt is expected to be lifted on May 6.