The trading halt of Osim International shares went into its second day yesterday, with the firm's push to be privatised hanging in the balance.
Osim surprised the market by stopping the stock trading on Tuesday afternoon, just hours after chief executive Ron Sim raised the buyout price to a final offer of $1.39 per share. The reason behind the abrupt halt - which left shareholders with no time to deal - remains unclear, but Osim will have to reveal its cards by the end of today, given the Singapore Exchange listing rule that limits a trading halt to three market days.
The final offer of $1.39 is inclusive of a two-cent final dividend. Osim shares last closed at $1.37.
Mr Sim already owns 69.22 per cent of the group and needs to build his stake to 90 per cent to take Osim private.
But his offer may not be compelling enough for the shareholders who remember that the stock was as high as $2.70 in early 2014.
Market watchers The Straits Times talked to noted that while the offer is certainly not very attractive, it is also not unreasonable, given the company's strained outlook and the stock's technicals.
Remisier Desmond Leong said: "Since the high in 2014, Osim shares have spent the past year and a half on a slide. It may not be very realistic to expect an offer of something like $2 a share, especially when both the company's performance and the share price do not have too much (of an) upside."
Osim, which makes massage chairs and holds a majority stake in the TWG Tea Company, reported a 50 per cent, year-on-year net profit drop to $51 million last year, while sales fell 10 per cent to $620 million. The revenue from its biggest market, North Asia - mainly China - shed 6.6 per cent in the period.
Osim shares have a 20.2 price-to-earnings ratio, and a price-to-book value ratio of 2.55, with a market cap of around $1.02 billion. These ratios are on the high side, compared with some of the other notable companies with a similar market size.
For instance, the price-to-earnings ratio for developer OUE is 10.7, 15.3 for United Engineers, and 10.1 for healthcare product-maker Haw Par Corp. Their price-to-book ratios are all below one.
"Given the headwinds in China, and how saturated the massage chair market is, the growth potential of Osim and its stock is limited," Mr Leong noted.
Remisier Alvin Yong agreed: "These numbers tell me that $1.39 is a fair offer - unless you are expecting the share price to be 30 or even 40 times the earnings.
"My client is ready to accept the offer. It is at least worth considering and, if the deal does not go through, chances are the share price will only drop further amid these business conditions."