I have held this share for over two years and have watched it decline slowly over that time frame. Last week, I cut my losses at -22%, including dividends. Beshom breached my minimum market cap rule of 100 mln USD long ago. I don't think that it will ever grow back to that amount. Beshom sells TCM (Traditional Chinese Medicine) products under the Hai-O brand name. It also targets the Malay/Muslim population with consumer staple products under the brand name Sahajidah. Hai-O is mainly sold through physical stores and e-commerce, while Sahajidah products are distributed through an MLM scheme.
There are always controversies surrounding multi-level marketing schemes. I realize that not every MLM is a Ponzi or pyramid scheme. However, legitimate MLM companies like Herbalife and Amway occasionally raise legal and ethical questions too. There is another concern. MLM seems to be disappearing slowly. People have no more time and desire to meet up and sell pots, pans, and Tupperware boxes to each other. We now have e-commerce sites like Amazon, Shopee and Lazada, which offer much more transparency on the value and quality of everyday products. Gathering information about products and ordering them is much more efficient through these websites.
Let me be clear that I did not discover any legal or ethical issues surrounding Beshom's MLM operation. It looks like they sold a popular water filter in 2017. Revenues and also the share price peaked that year. Unfortunately, it has been only downhill from there. I guess that end-users don't need a new water filter every year. The Covid lockdowns have been a factor here too. However, we do not see Beshom recover like most retail stores now that these lockdowns have ended.
Perhaps Beshom should drop the MLM component altogether and focus on its wholesale and retail operations. There is room for improvement in its e-commerce business. I noticed a significant presence of Hai-O products on Lazada and Shopee, but the monthly sales numbers are low. The Hai-O brand can be found on the packaging of vermicelli, bird's nest, tea, coffee, medicine and many other categories. When you spread your brand so broad and thin, it is not much more than a seal of approval. It becomes like a house brand of a supermarket. This type of marketing will not allow you to charge higher prices than your competitors. Hai-O does have an Instagram presence, but it looks like a message board rather than a lifestyle destination. It has less than 2,000 followers. Hai-O seems clueless in the modern world of retailing. I don't see where the brand is going.
To end positively, let me note that Beshom has no debt. In fact, 30% of its market cap is in cash. The balance sheet is solid, and there are resources to turn the business around. I do not like to bet on turnarounds, but this might be an interesting opportunity for other investors.