Osim International shares shot to a four-month high yesterday in the wake of news that the lifestyle firm's founder is mounting a buyout.
The counter jumped as much as 14 per cent to $1.395 within the first hour after a trading halt was lifted, before closing at $1.375, up 15 cents or 12.24 per cent.
Osim founder Ron Sim announced on Monday that he will pay investors $1.32 a share in an unconditional cash offer that will cost him about $310 million. Mr Sim already owns 68.31 per cent of Osim.
The offer price represents a premium of about 33.5 per cent to the volume-weighted average price over the three months to Feb 29 and a 7.8 per cent premium over the last traded price on March 1 before the stock was suspended.
The home-grown company listed on the Singapore Exchange in July 2000 and is known for its massage chairs, but also distributes health supplements under the GNC and RichLife stores and owns tea brand TWG.
OCBC Investment Research has recommended that shareholders accept the offer, "given the tough environment ahead and the lack of strong drivers for earnings".
But DBS Group Research suggested yesterday that minority shareholders should try "holding out for a better offer". It noted the six largest shareholders after Mr Sim collectively own 13.79 per cent of the firm. These investors bought into it at varying periods, ranging from the first quarter of 2012 to the second quarter of 2014, the report added.
DBS Group Research said: "We believe the shareholders, largely institutional funds, can collectively determine whether the current offer can be a success."
The volume-weighted average price for those who bought shares in 2012 is $1.366, above Mr Sim's offer, and it was even higher for those who bought shares from 2013 to last year.
Based on its analysis, DBS Group Research said only the volume- weighted average price of $0.696 in 2010 and $0.964 this year are below the $1.32 offer price. It is downgrading its call for the counter from "buy" to "hold", with a target price of $1.28.
Veteran investor Mano Sabnani, who owns 10,000 Osim shares, is holding out for a better offer. He told The Straits Times "a price closer to $2" would better reflect the firm's value. He bought the shares late last year at about $1.03 apiece.
"They have the massage chair and health equipment business, the TWG business and also a strong presence in China. My assessment is that they are capable of increasing their earnings once the Chinese economy recovers," Mr Sabnani added.
Analysts said the share price surge was not unexpected. "There may be speculators entering the market hoping for a better offer or shareholders buying more shares to shore up their bargaining power," said NRA Capital research director Liu Jinshu.