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chocolatefish asked 9 years ago

I would like to ask about the valuation of OSIM which has recently been battered down to $2.60 and today, $2.57.
OSIM being a company with good management considering their founder has large number of shares in it, good branding with the businesses it acquired in TWG and GNC, good financial which consistently been generating record profits each quarter.
Recently, they announced a conversion bond which in future able to convert to a share price of $3.52. I presume this shows management’s confidence in the share price of the company in the near future.
However, given these positive news, OSIM share price has been going down from a high of $2.90. This might be the risks in their investment in China, investors unsure of the benefits of their conversion bonds and OSIM’s products that are considered luxury goods to be volatile to the uncertainties in the market.
Would like to hear some views on the prospects of OSIM from here.

1 Answers
Victor Chng answered 9 years ago

Hi Chocolate Fish,      
Before we move on, firstly, what is your valuation of Osim? The figure you mentioned is the stock price of Osim. It does not reflect the intrinsic value of the company. Share prices fluctuate based on market sentiment.
I have no doubt that Osim is one of the best performers on the Singapore Stock Exchange (SGX) for the past few years. It is in good financial shape and generates record profits each year but one thing that keeps me pondering is why does the company need to raise convertible bonds since they are in a cash rich position?    
These convertible bonds are able to be converted into shares in the future and dilute existing shares. My personal opinion is that the company should take a bank loan instead of convertible bonds since they are so cash rich. A bank loan will not dilute the shareholder interest.     
I hope I answered your question :)