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.

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