Shares of Best World International surged in early morning trade yesterday, prompting the multilevel marketing firm's fifth query from the regulator in five months.
The stock shot up 4.45 per cent to $1.76 three minutes after the opening bell and closed 9.5 cents higher at $1.78, a rise of 5.6 per cent.
Best World told the Singapore Exchange (SGX) that the unusual activity might have been a result of the firm's announcement on Sunday that it had won in-principle approval to proceed with a one-for-four bonus share issue.
"SGX approved the listing of our bonus shares, so over the next few weeks, we'll be able to announce the book closure date," Best World chief operating officer Huang Ban Chin told The Straits Times, adding that the bonus shares will only be issued months later.
Another possible reason for the early morning spike in interest was that investors' website NextInsight had published a bullish recommendation on the stock on Sunday.
Best World's share price has jumped five-fold from 33.5 cents at the start of the year to $1.685 at Friday's close. Earlier, analysts pinned much of the rally to expectations that the seller of beauty products would secure a direct selling licence in China before the year end, and deliver stellar results.
Best World won that licence last month and earlier this month announced a five-fold surge in half-year net profit to $13.3 million, so yesterday's jump made some investors scratch their heads.
But CIMB Securities analyst Jonathan Seow, who has a $1.98 target price, is not worried.
He said: "Maybe the excitement comes from the bonus issue, and the fact that growth is very hard to come by in this market in general."
"SGX is very on the ball," he added of the regulator in the wake of the 2013 penny stock crash.
Mr Huang said: "I think our company is fundamentally strong.
"Prior to obtaining our licence in China, we've been exporting our products to an agent there to reach brand awareness, so when our licence is effective at the end of the year, we don't have to start from ground zero."