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.

  

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