Broker's take: RHB suspends coverage on Best World

RHB Research Institute has suspended coverage on Best World International until findings from an independent review ordered by the Singapore Exchange (SGX) on the skincare maker and distributor's business in China are made public.

On Wednesday, the regulatory arm of the bourse operator ordered a review after short-seller Bonitas Research questioned the accounting behind Best World's profits and its sales practices in a 28-page report.

The short-seller 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 isn't the only short-seller with sights set on Best World, which Bloomberg data showed was the most shorted stock on the Singapore exchange. An anonymous group that calls itself Valiant Varriors published the first instalment of a supposedly two-part report on Wednesday, echoing concerns about Best World's selling practices in China.

Best World shares fell as much as 11 per cent on Wednesday and when the company halted trading of its shares at 11.25am, the counter was down nine per cent at S$1.62 on volume of 8.7 million shares. Of those, some 2 million shares were sold short.

The research house said: "We prefer to stay cautious and suspend coverage on the stock, until further details from the third-party independent review report are made public."

In its previous report of Best World on Feb 28, RHB Research Institute had a "Buy" recommendation, with a target price of S$2.95.