OSIM International

[nutty]

Am wondering if they have the intention to sell healthy tea or herbal tea under the TWG branding, as a comPlement to their massage chairs.

[Musicwhiz]

Business Times - 16 Apr 2011

Ron Sim's tea break

OSIM acquires stake in luxury tea brand TWG & also forms North Asian JV with it

By KELLY TAY

OSIM International, the lifestyle products group best known for its massage chairs, has acquired a 35 per cent equity stake in TWG Tea Company Pte Ltd, for $31.36 million.

This is alongside a newly-formed joint venture (JV) with TWG - OSIM-TWG (North Asia) - of which OSIM will be a 60 per cent majority shareholder.

The partnership targets expanding Asian markets, covering four North Asian countries: China, Hong Kong, Taiwan, and South Korea. 'Four countries may seem small, but these are OSIM's areas of expertise, with a track record of about 25 years in the region,' said Ron Sim, chairman and CEO of OSIM.

The joint venture will accelerate TWG's geographical expansion across Asia, allowing the company to tap the growing demand for luxury Asian brands among middle to upper-income households in the region.

Calling the joint venture 'more than just an investment', Mr Sim stressed that the partnership represents an opportunity to 'not only grow together but shape the market in North Asia'.

For starters, Mr Sim confirmed that a TWG salon and boutique - much like the one in Singapore's ION Orchard - will open in Hong Kong's International Finance Centre (IFC) mall in the third quarter of this year.

Said Mr Sim: 'Our value-added investment in TWG Tea is expected to be earnings-accretive since TWG Tea is one of the fastest-growing luxury tea brands in the world.'

Teas of Singapore-based TWG (which stands for The Wellness Group) are available globally in at least 20 countries. Worldwide online ordering is also available. Besides running its retail operations, TWG is also a supplier to hotels, restaurants and international airlines such as Singapore Airlines.

The partnership 'elevates OSIM's existing lifestyle philosophy', Mr Sim said, adding: 'TWG Tea is a premium brand with an impressive track record. Like OSIM, it deals with well-being and lifestyle products.'

[Musicwhiz]

Business Times - 19 Apr 2011

Hock Lock Siew
OSIM tea venture: some questions

By WONG WEI KONG

RON Sim must have read the tea leaves and liked what they told him. Problem is: the market needs to know exactly what he saw.

Last Friday, Mr Sim's OSIM International, the lifestyle products group best known for its massage chairs, said that it had acquired a 35 per cent equity stake in TWG Tea Company Pte Ltd for $31.36 million. Also: the two companies will set up a joint venture (JV) - OSIM-TWG (North Asia) - of which OSIM will be a 60 per cent majority shareholder.

The announcement certainly piqued interest, and a tie-up between two well- known Singapore brands does have feel- good features. But OSIM is a listed company, and its acquisition track record has not been trouble-free. So the hard questions need to be asked.

Just on the face of the announcement itself, the development seems to do more for TWG than for OSIM. OSIM's investment clearly is a boost for TWG. The partnership will target expanding Asian markets, covering China, Hong Kong, Taiwan and South Korea. The joint venture will accelerate TWG's geographical expansion across Asia, allowing the company to tap the growing demand for luxury Asian brands among middle to upper-income households in the region, as well as penetrate the US and Europe.

And the price of OSIM's 35 per cent stake in the luxury tea brand values TWG at $90 million - not bad for the company and its owners, considering it opened its first Singapore outlet as recently as 2008.

But for OSIM, the benefits are not so clear. Of the four markets the venture is targeting, OSIM has already established itself in three and with long operating track records too (the exception is South Korea). While OSIM said the acquisition will be earnings-accretive, it did not provide any figures to show why. There were no disclosures on how the valuation was arrived at, no peer comparisons and, indeed, no indications regarding the state of TWG's earnings, or its gearing. All OSIM said essentially was that TWG fits its lifestyle and well-being business.

Mr Sim did call the joint venture 'more than just an investment', and stressed that the partnership represents an opportunity to 'not only grow together but shape the market in North Asia'.

That raises more questions. Why is the acquisition more than an investment? How does a $30-million-odd venture shape the whole regional market? What is the form of this shape, and how will it change OSIM?

These questions mean that investors are unable to embrace the acquisition. 'Barring further details, we have not input any earnings contribution from the acquisition into our projections,' said DMG Research in a note. And at the back of investors' minds would be the troubled spell OSIM went through after its acquisition of US retailer Brookstone in 2005. Brookstone's less-than-sparkling performance and accounting for the acquisition tore away at OSIM's earnings and plunged it into the red, until it took a $77.31 million write-off on its investment in Brookstone. OSIM's share price yesterday told just as much, closing 3 per cent lower at $1.59.

To be fair, one could also take a more optimistic view. It can be argued that OSIM has learned from Brookstone and has recovered its footing, and has the confidence to acquire again. Instead of chasing big targets like Brookstone, it is now making acquisitions it can digest comfortably. And choosing a Singapore target means the accounting issues at Brookstone (caused by different treatments here and in the US) will not be repeated; so too the problems OSIM encountered in the US because of cultural differences in management.

And Mr Sim has dropped more than a hint that TWG may not be a one-off; it could be the first of several acquisitions OSIM may be planning to build on its well-being and lifestyle focus. With the OSIM stake putting a value on the whole company, a TWG IPO could lie ahead. If market conditions are right and if the tea group continues with its rapid expansion, OSIM's stake in TWG could be worth a pretty penny.

But without OSIM revealing more, all that is just conjecture. Tea is supposed to clear the head; in this instance, however, things are rather fuzzy.

[Musicwhiz]

This is the 25-bagger company everybody missed! And the most often-quoted hindsight analysis in the newspaper.....

Business Times - 27 Apr 2011

OSIM's Q1 profit surges 150% to $20m

Group says revenue growth primarily driven by launch of new products

By MICHELLE TAN

A BETTER product mix, new innovative products and continued strong branding led OSIM International to achieve stellar results in the first quarter of 2011.

Net profit in Q1 2011 climbed $12 million or 150 per cent year on year to $20 million, while revenue rose 16 per cent to $149 million. Earnings per share increased to 2.8 cents from 1.2 cents during the same period a year ago.

Operating cash flow also remained positive, with the group ending the quarter in a net cash position of $29 million. The healthy lifestyle products group said revenue growth was 'broad-based' and primarily driven by the launch of new products. In the light of its strong results, OSIM has proposed an interim dividend of one cent per share payable on June 16.

The group may also see an official dividend policy in its times ahead as the directors announced that they will be recommending an official dividend policy of 10 per cent to 30 per cent of the annual net profit of the group, in conjunction with Taiwanese Depository Receipts (TDR) requirements.

Briefing analysts and the media yesterday, management guided that they are expecting an answer from the Taiwanese authorities sometime this week and if all goes well, the proposed TDR listing is expected to be carried out sometime in May.

In terms of expansionary plans, OSIM hopes to broaden its global footprint going forward. To highlight some of its expansion plans, the group expects to open between 60 and 80 OSIM outlets as well as 60 to 100 RichLife outlets in China by the end of this year.

New products are also in the pipeline, with items such as the uJazz - the first Internet massage chair - slated to be launched soon.

Recently, OSIM also acquired a 35 per cent equity stake in TWG Tea Company Pte Ltd for $31.36 million.

This is alongside a newly formed joint venture with TWG - OSIM-TWG (North Asia) - of which OSIM will be a 60 per cent majority shareholder. However, the news was met with some controversy as the recent acquisition triggered a spate of bad memories from OSIM's past.

Back in 2005, the group acquired US retailer Brookstone and as a result faced some financial turbulence.

That said, to be fair, Brookstone was a leveraged buyout which characteristically involves a large amount of borrowings and, unfortunately for OSIM, at a high interest rate as well.

In the case of TWG Tea, the group will be funding the acquisition solely from internal sources, suggesting that the group has learnt a lesson from its experience with Brookstone.

Plans are already underway in preparation for the opening of a TWG Tea salon in Hong Kong's popular International Finance Centre mall in the third quarter of the year.

'Our value-added investment in TWG Tea is expected to be earnings-accretive since TWG Tea is one of the fastest-growing luxury tea brands in the world,' said OSIM's chief executive officer Ron Sim.

More importantly, Mr Sim reiterated that TWG Tea is a premium brand with an impressive track record and like OSIM, it too deals with well-being and lifestyle products.

Yesterday, OSIM's share price climbed three cents or 1.8 per cent to $1.66.

[Musicwhiz]

Hopping on the debt train!

(Not Vested)

Business Times - 08 Jun 2011

OSIM issuing 5-year convertible bonds

By NISHA RAMCHANDANI

LIFESTYLE products group OSIM International is issuing convertible bonds to raise some $120 million, it said in a filing to the Singapore Exchange yesterday.

According to a source familiar with the deal, the five-year bond, which has a put option in the third year, will have a coupon rate in the range of 1.75 per cent to 2.75 per cent.

BT also understands that the conversion price will be a premium in the range of 25-35 per cent over yesterday's closing price of $1.62 per OSIM share.

The bond issue will be denominated in Singapore dollars. The bond issue will be offered to institutional investors and accredited investors, OSIM said.

BT understands that the bond also carries an issuer call in the third year, with a call trigger of 125 per cent above the conversion price.

'The company intends to use the net proceeds of the issue to enhance general corporate and working capital resources; and to provide finance for potential value-added acquisitions which the company may pursue as part of its strategic objectives and/or to reduce existing debts,' OSIM said.

The closing date is on or around June 8. Hongkong and Shanghai Banking Corporation (Singapore), Credit Suisse (Singapore) and The Royal Bank of Scotland (Singapore) have been appointed as the bookrunners and lead managers.

According to Matthew Song, HSBC's head of equity capital markets (South-east Asia), demand has been robust, with it being oversubscribed by more than five times.

'In 2011, there is more than US$20 billion worth of redemption from the convertible bond market so there's a lot of liquidity to be put back into work,' said Mr Song, adding that this is the first Singapore non-Reit convertible bond this year.

[mrEngineer]

Convertible bonds are restarting again!! Perhaps companies are starting to get jitters on future interest rate hikes!

[corporatefatcat]

This does not look good, I wonder why they needed to borrow funds when their business has been pretty well.

Hopefully it's all for the better as Ron Sim has a huge stake in his own company.

[Musicwhiz]

This does not look good, I wonder why they needed to borrow funds when their business has been pretty well.

Hopefully it's all for the better as Ron Sim has a huge stake in his own company.

Most companies are not willing to just sit on their butts and enjoy the nice FCF. They feel as if they have to engage in some form of M&A activity to justify the use of the cash. This is opposed to simply returning the cash to shareholders via increasing dividends.

OSIM's track record on M&A has not been good. Brookstone was a notorious example of how costly such an exercise can be. Incidentally, OSIM at the time also leveraged quite a bit for the acquisition.

[corporatefatcat]

This does not look good, I wonder why they needed to borrow funds when their business has been pretty well.

Hopefully it's all for the better as Ron Sim has a huge stake in his own company.

Most companies are not willing to just sit on their butts and enjoy the nice FCF. They feel as if they have to engage in some form of M&A activity to justify the use of the cash. This is opposed to simply returning the cash to shareholders via increasing dividends.

OSIM's track record on M&A has not been good. Brookstone was a notorious example of how costly such an exercise can be. Incidentally, OSIM at the time also leveraged quite a bit for the acquisition.

Yeah, their return on equity is really good, hopefully they can put the money to good use. Roger Montgomery talks about it in his book, when companies tend to run out of ideas, or to grow their egos. This is usually a bad thing when companies can't grow their own business organically and have to fork out premiums to grow the business.

I hope it is a case of once bitten twice shy. We don't even know how acquiring TWG is affecting the profitability of the business.

[lonewolf]

I usually get nervous when companies used ambiguous terms like 'to enhance general corporate and working capital resources; and to provide finance for potential value-added acquisitions which the company may pursue as part of its strategic objectives and/or to reduce existing debts.'

It's as good as trying to tell us 'we dun know why we need the money but trust us we need the money; and if we cannot find any use for the money, we will use it to reduce debts'

I remember a blip in the ST the other day which MW posted here where it was reported that OSIM, in partnership with Perennial Real Estate submitting bids for commercially zoned land in Paya Lebar and Punggol. So if I want to make a guess, I would say that he could be raising funds for his real estate adventure.

Time will tell I guess.