Month: March 2016

Being a fundamentalist, it is intriguing to read the technical analysis done by Dave, founder of See How I Trade. For the next few series of articles, I will attempt to combine both my bottom-up approach with Dave’s top down market analysis on SGX stocks. In this article, I will touch on Keppel Corporation, one of the most favourite blue chips among Singapore investors.

The past one year has been extremely unkind to Keppel Corporation, which suffered a triple whammy from the Lava Jato scandal, potential Sete Brasil bankruptcy protection and plunging crude oil prices. Due to this challenging environment, Keppel Corporation’s share price plunged to a 6 year low of $4.84 per share. Investors of Keppel Corporation were shell-shocked by the extent of the fall as in the year 2014, the share price was still trading at the $10 range. To drop by 50% in value within a year is frightening, even in terms of paper loss.

Many long-term investors of Keppel Corporation put on a brave front and one finance blogger even insisted that Keppel Corporation is not a pure oil and gas play. Of course everybody knows that Keppel Corporation is a conglomerate with diversified business in property, infrastructure and investments segments. But it is important to be objective and not be blinded by emotions. The matter of fact is that Keppel Corporation’s core competence is still in offshore and marine business. In fact, Keppel O&M has contributed S$481 million or one-third of the Group’s income for the year 2015. So to downplay the impact of the oil crisis on the company would be a mistake for Keppel investors.

Based on the recent financial results, performance of Keppel is mixed at best. Cash flow for the full year is horrible, at negative $705 …

Raffles Medical Group (RMG) recently announced share split of each company share into three ordinary shares. It is not a done deal yet and the proposed move is still subject to approval of shareholders at a general meeting and the approval of SGX.

The rationale given is that the proposed share split will make the company shares more accessible to retail investors because of the reduction of each board lot. In addition, the move will also expand the shareholder base from the current approximate 7,780 shareholders.

I am not invested in this counter but have been tracking the company’s performance. Given that SGX has reduced the board lot trading size from 1000 to 100, RMG’s rationale for the stock split is not exactly convincing. This is because most retail investors can afford investing in RMG at current price, albeit at lower board lot size. On the flipside, existing shareholders may face risks of a decline in their share value after the implementation of the proposed share split. There is no assurance that the subdivided shares will be $1.39 after the implementation of the stock split.

On its financial health, RMG is doing reasonably well. Profit after tax is $69.3 million in 2015, a growth of 2.4% increase from $67.6 million in 2014. Notably, RMG registered a record revenue of $410.5 million for 2015, an increase of 9.6% from $374.6 million. Net cash position decreased from $143.8 million to $53.8 million in 2015. This is due to the company’s payments for investment properties amounting to $115.3 million and purchase of property, plant and equipment amounting to $34.7 million. The company is clearly embarking on an aggressive growth path as reflected in its investments in Raffles Holland V, RafflesHospital Extension, RafflesHospital Shanghai, and acquisition of International SOS (MC Holdings) …

OSIM founder may not succeed in privatising the company? When the market is bullish, news of merger and acquisitions are usually met with positivity because generally, valuations will be higher and thus, the take-over offers would often be attractive to shareholders. However, the case is usually reverse during bear markets because of the possibility of hostile take-overs by competitors.

Sometimes, the management may even attempt to privatise the company on the cheap with the eventual aim of sharing the profits and dividends among the major shareholders. This is probably the case for OSIM, which recently announced a shocking voluntary cash offer by the founder, Ron Sim. However, whether Ron can succeed in privatising OSIM remains a big question mark. In this article, similar experience can be drawn from K1 Ventures, which made similar approach back in 2012.

Firstly, under the SGX Listing Rule, in order for the privatisation offer to be successful, OSIM founder must acquire at least 90% of the total number of issued shares (excluding treasury shares). Thereafter, OSIM founder is required to buy over the remaining shares of those “dissenting shareholders” who refused to accept his initial cash offer of $1.32 per share. Currently, the founder holds 69.25% of the total shares and thus requires only an additional of 20.75% to delist OSIM.

In 2012, the management of K1 Ventures also made similar voluntary cash offer to privatize the company. Back then, the management made an offer of $0.135 per share, which was deemed way too low by most investors. Many investors had valued the shares at $0.30 per share and felt that the offer was too ridiculous to accept. Valuing the company was very tricky affair because many of K1 Ventures are privately-owned companies and there is very limited data for investors to …

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 …