Its chair business is missing the growth potential that TWG has.
Privatisation and a spin-off might be the key to rebalancing OSIM’s shareholder profile, according to a report by Maybank Kim Eng.
Historically, investors bought OSIM for the growth angle, which is now missing from the chair business. On the other hand, TWG looks promising with its long-term growth potential, but it is overshadowed by the chair business.
If Ron Sim, OSIM’s biggest shareholder, owned OSIM entirely, he would be taking over the role of supporting its capital needs but would be keeping future cashflow to itself.
It is not completely free of risk, though, as OSIM seems to be rationalising its China presence. The number of OSIM stores in China has dropped from to 244 now from its highest in 2011 from 274, while the number of Richlife stores has been axed from less than 150 stores to less than ten now. Further, this downtrend is likely to persist as China continues to slow.
Meanwhile, by spinning off TWG, Sim will be able to offer his shareholders a chance to participate in TWG’s future growth at perhaps a lower price. Maybank asserts that minority shareholders could be given the choice to take shares in a separately-listed TWG instead of cash.
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