Tag Archives: OSIM

Just wanting to be a denim jeans provider for the gold rush

This stock was purchased in a few tranches around the peak of the global crisis. It appeared that everyone in the market believed that the company was to close down soon. Thanks to the previous financial year in 2008, its loss was $99 million, the worst since it was listed on the SGX. At the peak of the crisis, it was trading at around 5 cents per share. While the situation was bad enough, the timing of the rights issue made it worse. The entitled rights were 2 for every 9 shares held and priced at $0.055. As one could imagine, the issue was heavily under-subscribed. That provided me an opportunity to subscribe more rights, which the company was eager to sell at that time. The stock was none other than OSIM. Mr Ron Sim, the chairman and CEO, held about 60-65% and some of the directors also held some percentage. That left the market float to be very small, probably 20-30%. 

 

The rest was history as OSIM underwent 22 quarters of growth pushing up the share price to a peak of $2.94 in May 2014. Of course, the share price had gone ahead of its fundamentals, but who cared if one was sitting on a gold mine. To commensurate with the growth, OSIM topped up its dividends pay-out, 2 cents for 2 quarters and one cent for the other two quarters. The dividend pay-out would have meant that I was able to recover my capital on this stock every one-and-a-half year.

There were two choices ahead. Both were happy ones, but not necessary equal. One was to sell out and stay cash, but it would be difficult to find another investment whose return could come near to this. Furthermore, it was difficult to catch the peak. The other was to sit tight and ignore the ups and downs of the stock price. I chose the latter (though, in hindsight, made a wrong choice). Apart from the dividends, what I wanted to play was to be a provider of the share in the shares lending program. This would help provide an additional passive income. I learnt this from the Levi story that happened nearly 200 years ago. It’s a situation of Levi Strauss providing denim jeans to gold seekers during the gold rush in mid-1800. Instead of rushing to look for gold, Levi Strauss chose to be a denim provider for the gold-seekers. In a similar way, instead of trading in and out of this stock, I decided to lend shares to those who were interested to borrow from me. Indeed, the lending was quite brisk. I managed to lend out to the maximum shares offered almost every month. There were not many scripts on offer due to its illiquidity. Of course, by now everyone knew that this happy situation only lasted about 2 years as Mr Ron Sim decided to take the company private around mid-2016. It is a hind-sight now, but was a future that I could not predict at that time. Should I have known that this additional passive income would last only two years, I would have sold them all out and dumped the cash into the bank stocks which I was slowly accumulating then. This additional money would have made it an extremely nice topping. Unfortunately, we are all human beings and we are not able to push our advantage to its maximum.  Just as Warren Buffet mentioned – the rear mirror is always clearer than the front view. But still, the compulsory take-over had made it a 16 times multi-bagger for me, not including dividends and the interest in the shares lending program.

Thanks to OSIM and the shares lending program.                          

 

Brennen has been investing in the stock market for 27 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy. Analyses of some individual stocks can be found in bpwlc.usefedora.com. Registration is free.

  

Feeling uncomfortable about Comfort-Delgro

I remember I had informed students in the Facebook closed group in mid-2015 that Comfort-Delgro (CD) has probably plateau after pricing all the good news. Recently, I repeated once more on 13 April 2015 when the share price hit $2.91. On the very day, the STI moved up 75 points and following an announcement on additional requirements for rental cars, such as Uber and Grab-taxi. In the long run, rental car services can pose a direct threat to CD’s taxi business.

Slide17

In retrospect, crossing $3.00 per share had been a great feat in view that it was an essential service stock. The share price was only around $1.50 per share 4 years ago. Up until 2015, it had been increasing year after year for 4 years running. Prior to that, the share price had been quite sluggish, for it was an ‘old-economy’ unexciting stock. The SMRT, on the other hand, seemed to be enjoying a greater fanfare as new lines were built. (However, that cannot be said of SMRT share price during that time.) Fundamentally, Comfort-Delgro is rock-solid compared to the SMRT. I like the stock very much. Just based purely on its cash hoard in 2014/2015, it could have paid out all its long- & short-term loans fully without incurring a cent of debt, making it a debt-free company, and yet maintaining a status of one of the largest (if not the largest) transport company by asset in the world. On the other hand, SMRT was struggling even to this very day to make profit out of its core business, ie rail operations. SMRT managed to keep itself in the black mainly because of advertising and rental businesses. These are not their core businesses.

As the business grew quarters after quarters due to its increasing presence overseas such as China, Australia and UK, so was the share price of CD. Along with this growth story were a spat of good news in the past 2-3 years such falling oil price and the land transport sector under-going complete overhaul into a asset-light regime. This has led many analysts to become more optimistic in their approach. Some even set their target price to as high as $3.46. By the mid-2015, there were at least three analysts with target prices above $3.40, and quite a number of them projected it to be at least $3.00 per share. In the best of my memory, I was not sure if any analyst offered a ‘sell’ call as the general outlook looked rosy. Perhaps, all these analyses were based on the assumption that the existing assets will be sold to the government, and the ‘windfall’ from the sale of the assets is to be returned to the shareholders in the form of special dividends.

Taking a leaf from the lesson learnt in OSIM’s case that too much good news that feed into ever-increasing share price can make a sad ending to even a fairy tale story, I decide that I should go against the tide to sell at least some shareholding of my CD stocks. Having doubled my investments over the years, I should have a more than 50% buffer, even if the stock price kept coming down gradually. In other words, I need not sell them hurriedly. After all, it is a fairly liquid stock and good news was still feeding into the share price. It was even touted to be the best performing stock at that time. I started scaling down my CD shares in mid-2015, each time taking advantage of its short-term high. By today, it is 11 months since I made the first sell of my CD shares.

Slide16_cr

In the meantime, the oil price continued to sink and it did not bottom until February of 2016. However this had already been reflected in the share price. Perhaps, the decreasing oil price had helped CD share price to bleep slightly above $3.00 per share. Meanwhile, the news of rental cars, like Uber and Grab-taxi, was probably beginning to bite even though the CD management seemed to brush it off initially. Taxi operation in Singapore is the most lucrative business for Comfort-Delgro, and if Comfort-Delgro were to lose its market-share, its bottom line is likely get hit. That probably explained why Comfort Delgro share price hardly crossed $3.00 per share in the last two months.

Given the additional threat, even the share price of companies that provide essential services can still come under pressure, albeit a bit slower compare to high-growth stocks. That said, Comfort-Delgro is still a great company in view of its deep pockets and the management’s ability to generate multiple sources of income. When the time is right, and of course when the price is right, perhaps, it is time to take comfort again. I will not catch a falling knife for the moment.

Disclaimer:

  1. This article is not a recommendation or an advice to buy/sell the mentioned stocks. It is just a pure sharing with the readers of this blog.
  2. Note that the share price of the mentioned stock could change abruptly upwards or downwards especially with the asset-light arrangements with the transport authority. The author does not have any privy information of the company or its related matters other than those released by the company publicly.

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

 

Good-bye to OSIM (partially)

As I thought through, perhaps I will make a partial sale of my OSIM shares to Vision Three, a private investment vehicle of Ron Sim. For good or for bad, at most, I become a minority interest holding some shares of OSIM as a private company.

OSIM-logo

However, the way I see it, looks like Ron Sim should be able to take OSIM private. By yesterday on 27 April 2016, he had garnered 88.84% of the total issued shares. With about 2 days to go, I think that he should be able to cross the threshold to take over the company private.

Well, now it is time to think where to deploy the returned cash for another, hopefully, a multi-bagger.

Good-bye OSIM!

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

OSIM-The Q1 results & interim dividend cut likely to tilt the balance towards privatization

Mr Ron Sim through his private investment vehicle, Vision Three Pte Ltd, has now acquired of 5,451,463,164 shares from the minority shareholders. This forms about 6.94% of the total shares. To date Mr Ron Sim, through his investment vehicle, has accumulated 76.19% of the total float. In the meantime, OSIM has just released its Q1 2016 financial results. It was rather disappointing. The net profit dropped whopping 42% to $7.8m even though the revenue dropped only 8% to $138.3m. While the financial results may seem disappointing from a company’s perspective, it may in a way help Mr Ron Sim in his privatization plan. In fact, it is to his advantage if this quarter’s financial results turned out bad.

Due to its consistently poor financial results in recent quarters and, very importantly, a cut in the future interim dividend, it is very likely that the share price would fall. If not for the on-going cash offer made by him through his investment vehicle, Vision Three Pte Ltd, we should expect the share price to fall further. In the normal circumstance, this may be bad for him as a biggest shareholder, but given that his cash proposal is still on the table, it may tilt minority shareholders to sell their shares to him through Vision Three Pte Ltd. With about a week to go, I should expect more shareholders (likely to be more than another 6.94% received in the 1st half of the new cash proposal.) to come forward to sell their shares to him.

Who knows, after the successful privatization, the financial results may once again start to improve.

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

OSIM – new cash offer of $1.39 per share

Since the new cash offer of $1.39 per share more than a week ago, Mr Ron Sim through his private investment vehicle, Vision Three Pte Ltd, has now owned a total of 554,456,143 shares. This represents about 74.77% of the total share outstanding as of 5pm on 13 April 2016. Since the announcement of the cash offer to take OSIM private, Mr Ron Sim’s stake has increased by 5%. This means that there are 187,137,413 (or 25.23%) shares still remains in the float. Although the closing date has now been postponed to 29 April following the new cash offer, it is drawing closer by each passing day.

Slide12a_cr

Now is the mid-point between his new offer and the end of the offer date. Given that he has accumulated an additional 5% of the total shares outstanding to date, therefore, it is within expectation that he should be able to accumulate another 5% in the next few days. This would mean that he should have more than 80% (or even 85%) by 29 April 2016. However, I am not sure if at this price, it is able to cross-over the 90% threshold to take the company private. There will definitely be some reluctant shareholders who would not sell their shares at this price as they might have bought the share at a high price when the share price of OSIM crossed $2 per share.

If we look at the situation from the Mr Ron Sim’s perspective, for every 1-cent increase in his cash offer, it is going to set him back by about $2.2m (excluding the extra fees and additional costs). Therefore, it is of course in his interest to set a price just to cross the threshold of 90%. Hence, each step increase is not likely to be significant. However, I do believe that if he sensed that the threshold is within a ‘striking distance’, he may make a final higher offer to reach his objective. As a shareholder since the global financial crisis in 2009, I shall closely monitor the progress in the next few days before making my decision.

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

 

OSIM share price

Mr Ron Sim, the chairman and CEO of OSIM international made an offer to buy the rest of OSIM shares not own by him at an offer price of $1.32. According to sources, he owns 69.25% of the shares issued. That means that the free float is about 30% (assuming no shares in the treasury which is highly unlikely). Nevertheless, that still means about $300m price tag to buy up all the shares currently not own by Mr Ron Sim.

Frankly, many retail investors who bought during the good days when OSIM on an unprecedented growth path for 21 quarters would have been disappointed.

Slide9

Those who had bought the shares between 2nd half of 2012 and even until Q3 of 2015 would have been “out-of-money” based on this proposed offer and may not likely to accept this offer. (Of course, it may not be that simple as there are infinite trade possibilities.) All said, the trading price over the next few days should set the tone whether the minority shareholders, as a whole, are happy with the offer price. Based on closing price of consistently above $1.32 over the last few days, it appeared to indicate that minority shareholders may not accept the price offer of $1.32 even though it appears that the premium over the offer price is waning.

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

OSIM: Will it fall off the cliff?

The 1st quarter results has not been encouraging. The revenue suffered a 13.2% and 15.7% drop in the revenue from Q1 2014 and Q4 2014 respectively. Consequently, the net profit attributable to shareholders tanked to about 55% and 52.9% from the said quarters.

Slide27

But then, what is in for the shareholders going forward? The gross and net profit of about 73-74%% and between 10-15% respectively appeared quite consistent. To increase profit mean simply to increase the topline, ie. to increase the sales. The operating cost components are fairly consistent between $90m and $95m.

 Assuming a $25m drop in the revenue in Q2 2015 and stay constant there for the next two quarters going forward earnings per share to about 1.62 cents. That should translate to about 6.61 cents for the year. That gives a PE of about 25 based on current price. But this will likely to trigger another round of fall in the share price to about $1.30 and $1.35 (conservatively) as the growth engine has stalled bringing a PE of about 20.

Assuming that the revenue managed to increase to about $170m, and stay consistently there should put the share price back to about $2 or just below it.

The answer lies with the sales team.

 

 

coverblue (2)

(Brennen Pak has been a stock investor for more than 25 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”) – The ebook version may be purchased via www.investingnote.com.