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OSIM International - Maybank Kim Eng 2016-04-05: Take It

OSIM International - Maybank Kim Eng 2016-04-05: Take It OSIM INTERNATIONAL LTD O23.SI 

OSIM International (OSIM SP) - Take It 


Still low but the final offer 

  • Ron Sim has raised his offer price for OSIM from SGD1.32 to SGD1.39, including 2cts DPS, and indicated that this is his final offer. The offer closes on 25 Apr. 
  • We think the price is still low, but if that is the best they can get, minorities may have no choice but to accept. 
  • The alternative is sitting through future earnings volatility or even dividend cuts. 
  • There is one last hope – an activist shareholder – but the chances appear low, in our view. 

No further revisions. Period. 

  • We find Mr Sim’s final offer still on the low side, vs our suggested SGD1.46 on 7 Mar, which has become consensus. It is even lower if one considers that the final DPS of 2 cts is included in the offer of SGD1.39. 
  • However, since Mr Sim was categorical that there would be no further increases, this may be the best that minority shareholders can get. 

Accept the final offer... 

  • We would suggest accepting the new offer. 
  • By drawing a line on further increases, Mr Sim is basically warning minority shareholders not to test him too much. 
  • If they decide to hold on, it could be an uncomfortable ride. Earnings can become more volatile and dividends cut. And this could last at least six months, as takeover rules do not allow him to make another offer during this time. 

…unless activist shareholder appears 

  • The last hope now is for the emergence of an activist shareholder who can block him. However, the probability appears low. 
  • The biggest fund holder is Capital Group with 2.9%, followed by Templeton and Fidelity with 1.6-1.7% each. None has been involved in publicly-disclosed activist fights before, except for Norges Investment Bank. But Norges holds only 0.7%. 



Gregory Yap Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-04-05
Maybank Kim Eng SGX Stock Analyst Report ACCEPT OFFER Maintain HOLD 1.39 Down 1.46


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