Singapore’s Best World tumbles after short seller report

SINGAPORE • Best World International Ltd plunged to its lowest in six months after activist short seller Bonitas Research LLC published a report questioning the company’s accounting and sales.

The Singapore-based firm has overstated sales and profit in China, Matthew Wiechert’s Bonitas said in the report, which was based on on-the-ground research on the Chinese mainland. Bonitas believes that Best World’s “Chinese sales are a fraction of what was reported to shareholders”, it said.

Best World wasn’t immediately available to comment. The firm received a query on trading activity from Singapore Exchange Ltd (SGX) after shares dropped as much as 11%. Trading was then halted after a request from the company, pending the release of an announcement.

SGX’s regulatory unit expects “the company to call for a full independent review of all matters raised in the report,” it said in a statement after market hours. “We expect to be consulted on the terms of reference of the review,” it said.

Best World is the most shorted stock in Singapore, with short interest standing at 13% of the free float as of April 22, according to data from IHS Markit Ltd. Short interest as a percentage of the free float has almost doubled this month, the data show.

Best World said in February that it conducts “all areas of its business ethically and in compliance with applicable laws and accounting standards”, in response to a report in the Business Times that said it was “challenging to figure” where in China the company is selling its DR’s Secret line of premium skincare products. Best World also said it had appointed an independent auditor to review and address issues raised in the report.

Analysts have had concerns about the stock. DBS Bank Ltd’s Carmen Tay suspended coverage in August, citing “limited visibility on underlying consumption trends under the new Franchise model” in China. CLSA Ltd’s Horng Han Low maintained a ‘Sell’ rating in a report early this month, saying there is a “significant gap between consumer interest and revenue” in China.

Best World shares have tumbled 32% this year through Tuesday’s close after almost doubling in 2018. Of four analysts covering the stock, three recommend selling, while one has a ‘Buy’ rating, according to data compiled by Bloomberg.Bloomberg