OSIM International

[Ben]

actually, they issued S$170 mln zero-coupon unsecured convertible bonds due 2019 with a conversion price of SGD3.525. Now, the stock price has fallen to SGD 1.80, and they are doing share buybacks.

Didnt they just made a bargain???? If marked to market, the bonds would be worth lower, meaning 'gains on the debt'..
seen another way, isnt it like selling shares at SGD 3.525 and buying back at SGD 1.80 using interest free debt borrowings.

It doesn’t matter if they are buying it using cheap debts. What is important is the price they are paying to buy back its shares. If the business fundamental is deteriorating, buying at today’s “bargain” price will becomes tomorrow “overpriced”. It is like if I strike a million dollar lottery money. Yes, the money is a windfall to me, it is “free”, but I would not anyhow spend it on just any counters. I will buy only those that has long term potentials so that the one million could someday become a lot more.

[l0nEr]

actually, they issued S$170 mln zero-coupon unsecured convertible bonds due 2019 with a conversion price of SGD3.525. Now, the stock price has fallen to SGD 1.80, and they are doing share buybacks.

Didnt they just made a bargain???? If marked to market, the bonds would be worth lower, meaning 'gains on the debt'..
seen another way, isnt it like selling shares at SGD 3.525 and buying back at SGD 1.80 using interest free debt borrowings.

It doesn’t matter if they are buying it using cheap debts. What is important is the price they are paying to buy back its shares. If the business fundamental is deteriorating, buying at today’s “bargain” price will becomes tomorrow “overpriced”. It is like if I strike a million dollar lottery money. Yes, the money is a windfall to me, it is “free”, but I would not anyhow spend it on just any counters. I will buy only those that has long term potentials so that the one million could someday become a lot more.

agreed. im thinking more like arbitrage.
But then again, the bond has a fixed maturity. if it was a perpetual, then it would probably be a true arbitrage for the company.

[Freenasi]

So agree on this. I am also running away and avoid this counter. There are so many different brand making massage chair, and some are doing very well. And if u pass by any Osim outlet, 95% chance the workers are chatting and teasing each other. And among my friends, very few will buy a expensive massage chair.

Thanks! Read the link, I should say I am looking for growth stock.

Back to OSIM, May I ask what was your opinion on OSIM 1 year ago, before knowing their expansion plan to Russia, Turkey, before knowing this quarter's poor results, before knowing their new bond issue.

My opinion has always been that something fishy is going on and this stock is just a stock for playing/gambling/punting.

Even one year ago if you do this simple exercise...

Click on the link below
https://sg.finance.yahoo.com/q?s=O23.SI
On the chart on the right side click max. Look at how FAST AND FURIOUS this stock has gone up and down for past 10 years.

$2 -> 5 cents -> $2

Now decide if you still want to be vested in this stock.

Thanks!
I had asked Mr. Sim a few questions at annual meeting, and try to feel whether something are fishy. Obviously, I am not experienced enough, and failed to conclude anything.

In 2014Q2 reports, words of positive outlook disappear all a sudden, unlike previous quarterly reports, which may imply a poor 2014Q3 results. This may be a signal to tell retail shareholders run for life.

Not confident to the company future, so, I have sold my shares when price drop.

[CityFarmer]

So agree on this. I am also running away and avoid this counter. There are so many different brand making massage chair, and some are doing very well. And if u pass by any Osim outlet, 95% chance the workers are chatting and teasing each other. And among my friends, very few will buy a expensive massage chair.

It is a common observation of buddies here. The magic formula of success for OSIM remains a mystery to me. Its business model is beyond my circle of competency

(not vested)

[zerobeta]

"Inventories recognised as an expense, being cost of sales", is a normal and fine practice, isn't it?

(not vested)

Point 1: Could it be accrual expenses like "Inventories recognised as an expense, being cost of sales"

When OSIM sell these inventories after AR, it is recognize as 100% profit.

Not vested.

a bit cautious due to this:
1) what's inside the "other operating expenses"? why company didn't break them down? they are such a huge number
2) why didn't the company break down sales? as in how much come from massage chairs, TWG, and supplement business?
3) 2 lawsuits regarding TWG, one about its name and the other about share dilution of its founders
4) Brookstone saga, it seems to me management is trying to cover it up/ avoid discussing this openly? the bankruptcy itself shows management hasnt done enough due diligence prior to acquiring the business
5) Expensive valuation. Perhaps current expectation from the market is very high seeing how well the profits have grown. Any small mistake from Ron Sim can be very costly to investors.

just my 2 cents. not vested.

so apart from the discussion about the CB, can someone care to explain what's inside the "other operating expenses" that made up about 40% of sales?

Your previous explanation is not right because "inventories recognised as an expense, being cost of sales" are part of "changes in inventories of trading goods" and "trading goods purchased". This still leaves us with that huge "other operating expense".

To sweeten the company, we still have:
1) questionable CB issuance
2) insider trading
3) no disclosure of sales breakdown
4) 2 lawsuits
5) very little discussion on Brookstone


oh SIM!

[roxhockey]

The convertible bond is not interest free. It's coupon free, but there is effective interest because it gets issued at a discount. Eg you issue a $100 zero coupon bond due in two years and a buyer pays you $80 for it, they are getting an effective interest rate of ~10%.

[thor666]

Seems a lot of opinions on Osim.

Anyway. Another daily share buyback of 1.265M shares @ $1.792/share. Against backdrop of 4M+ shares traded.

Will monitor the buyback trend a bit, if it gets too frequent I won't post daily since this forum is more on value/fundamental investing rather than daily monitoring.

[greengiraffe]

So much on mkt buyback and price hardly rebound - not good signs...

Odd Lots Vested
Fully Vested Uinfinity
GG

Seems a lot of opinions on Osim.

Anyway. Another daily share buyback of 1.265M shares @ $1.792/share. Against backdrop of 4M+ shares traded.

Will monitor the buyback trend a bit, if it gets too frequent I won't post daily since this forum is more on value/fundamental investing rather than daily monitoring.

[Yoyo]

Hi Rickytj

1) what's inside the "other operating expenses"? why company didn't break them down? they are such a huge number.

Other operating expenses refers to the other selling, general and admin expense (SGA), excluding the following specific items that are separately identified in the income statement
- employee benefits (staff cost),
- depreciation and amortiszation expense

IMO, the larger components will be advertising cost (including star endorsement fee), distribution cost, rental of store and office, store restoration cost, operating lease expenses, professional and consulting fee (including legal fee on TWG Tea), warranty cost (if not taken to COS) and startup cost on TWG Tea. It also include bad debt provision, audit fee, fixed assets written off or impaired loss.

Some details can be found in the 2013 Audited Account (page 133) - Note 31 Profit before Taxation. The main component is lease payment (rental).

Hope this helps.

[zerobeta]

Hi Rickytj

1) what's inside the "other operating expenses"? why company didn't break them down? they are such a huge number.

Other operating expenses refers to the other selling, general and admin expense (SGA), excluding the following specific items that are separately identified in the income statement
- employee benefits (staff cost),
- depreciation and amortiszation expense

IMO, the larger components will be advertising cost (including star endorsement fee), distribution cost, rental of store and office, store restoration cost, operating lease expenses, professional and consulting fee (including legal fee on TWG Tea), warranty cost (if not taken to COS) and startup cost on TWG Tea. It also include bad debt provision, audit fee, fixed assets written off or impaired loss.

Some details can be found in the 2013 Audited Account (page 133) - Note 31 Profit before Taxation. The main component is lease payment (rental).

Hope this helps.

Thanks for your information.
I understand that we can find some details from their profit before taxation breakdown in note 31... but still those expenses found in the note 31 only make up about 30-40% of total other operating expenses and i believe those are the major ones already (Such as impairment and rental expenses)... that leave us with the other 60% of other operating expenses unexplained by the company... and this has been going on for so many years....


my concern is are theses expenses non-recurring, if yes why they have been there for so many years? if recurring, why are they so huge yet not disclosed? company can easily tweak these numbers behind the scene and set margin up and down as they wish....

just a concern from me though, i dont know if you find this significant or not but this bothers me...