Best World takes short-seller Bonitas to court for defamation

Bonitas stated in a report that Best World limited the scope of its independent review by PwC Singapore to divert attention from fabricated sales.

Personal care firm Best World and its co-founders Dora Hoan Beng Mui and Doreen Tan Nee Moi have commenced defamation proceedings against short-seller Bonitas, after the latter claimed in an April research report that it would profit from the decline in the former’s share price, a statement revealed.

“The company believes that the report contains false and defamatory allegations intended to undermine the reputation of the group and its senior management, cause a loss of confidence in the group and inflict damage on the price of the shares of the company to financially benefit Bonitas,” Best World said.

According to Best World, the Bonitas Research report, which was published on 29 April, has undermined confidence in the firm and destroyed its value.

Bonitas alleged in its report that Best World had intentionally limited the scope of the independent review by PwC Singapore on the group’s business in China in 2018 to divert attention from “fabricated sales” in China in 2017.

“It is absurd to allege that the scope of the review was calculated,” Best World responded, adding that the review was voluntarily commissioned by the firm in response to a separate report published in February focusing on Best World’s FY 2018 franchise model in China.

Best World further reiterated that Bonitas’ allegations that the firm fabricated at least $31m of its sales for FY 2017, on the basis that this figure is the difference between the group’s sales to the primary import agent and the primary import agent’s cost of goods of skincare products in FY 2017, is entirely incorrect and premised on a misapplication of “basic accounting principles.”

The disgruntled personal care firm explained that the difference in the group’s relevant sales and the primary import agent’s cost of goods sold (COGS) only indicates that the primary import agent did not sell all the products it purchased from the group in FY 2017 in the same financial year, not that any sales were fabricated.

“The report in fact states that the primary import agent reported an inventory balance of $33.7m at the end of FY 2017, which shows that Bonitas was aware that the primary import agent did not sell all of the products it purchased from the group before the end of FY 2017,” Best World highlighted.

Best World further stated that its primary import agent is an independent party and not “secretly controlled” by the firm, and that its Changsha Tianxin BWL Lifestyle Center was in fact open on 20 March 2019, as opposed to what was said in Bonitas’ research report.

“PwC has confirmed that [Best World’s] employees were at the Changsha Tianxin BWL Lifestyle Center on 20 March 2019 for an arranged visit as part of the review,” the firm highlighted.

Best World has reportedly voluntarily, and in consultation with SGX RegCo, decided to expand the scope of the review by PwC to include reviews of the group’s sales and inventory flow of the export model in China for the period from 1 January 2017 to 31 May 2018, as well as the group’s historical cashflow of the Singapore entities of the group from 1 January 2017 to 31 December 2018.

In connection with the expanded scope of the review, the company will request the primary import agent to provide its audited financial statements for FY 2017 to PwC for review, Best World added.