For many years, OSIM has been buying back its shares from the open market. As an investor, I had always been curious why the company was so aggressive. Nevertheless, purchasing shares from the open market is a good sign because it means the management has a lot of confidence in its growth prospect.
On 7 March 2016, legendary entrepreneur Ron Sim finally decided to show-hand. The founder of famous local luxury massage arm-chair maker announced a voluntary unconditional cash offer of S$1.32 for all the issued ordinary shares in the Company. The offer was made through Vision Three Pte. Ltd.
The last shares buy back announcement by OSIM was on 3 November 2015 and the company has already amassed 31,089,400.
The offer price represents a premium of approximately 31.8% and 33.5% to the volume-weighted average price (“VWAP”) per share for the corresponding one-month and three-month periods up to and including 29 February 2016, respectively.
I am a big fan of OSIM and has been tracking the stock for several years. In one of my previous posts on OSIM, I pointed out that the OSIM was trading at $0.04 per share during the Great Financial Crisis. Yes, that’s right, $0.04. Just imagine if you have $4000 invested in OSIM back then. You would have cashed in the offer from OSIM and made a huge profits of at least $100,000. Considering the fact that the Great Financial Crisis occurred not too long ago – only in 2008 – this sort of explosive profits would seem like a myth to most investors. After all, not many investors can claim to have the ability to turn a $4000 investment into $100,000.
Of course, no one would predict that OSIM founder would privatize the company after amassing so many shares over the years. Bear in mind that the shares were purchased from open market at different prices over the years, so it had costed the company at least an estimated $30 to $40 million to buy back the shares. This is not a small amount and this could mean that the founder, Ron Sim, feel that OSIM’s share price is deeply undervalued.
I am not vested in this counter but as a Singaporean, I really hate to see OSIM’s exit because there are a lack of listed home-grown companies in SGX. Many of the big boys are either MNCs or government-linked companies. OSIM’s counter stood out like a sore thumb among the blue chip counters. In this regard, credit must go to Ron Sim for growing the company into such a juggernaut. OSIM’s founder is an entrepreneur I have always respected since young, along side with Creative Technologies, Sim Wong Hoo. Incidentally, both of them share the same surname, Sim! But more importantly, both of them developed products and add value to our society. In addition to that, they put Singapore’s brand name in the world.
As an investor, it is important not to let emotions rule the head. OSIM investors should decide whether to cash in now and take profits or cut losses. I believe that there are some investors who had bought the shares at $0.04 and are still holding on to the shares. If so, good luck and laugh all the way to the bank! But I also believe there are a group of investors who bought the shares at a high of $2.90 in 2014 and are still holding on to the shares. If you are one of them, then pray hard that the take-over does not materialize because it will be a massive loss for you.
Whatever the case it may be, this is a sobering lesson that when it comes to stock investments, never adopt a buy-and-hold approach. Some people devise a retirement portfolio consisting only of stocks and thought that they can hold them forever and collect dividends. But they overlook the fact that business conditions change all the time and nothing lasts forever. Thus the golden rule is always to set entry and exit levels for each and every investments.
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