OSIM International

[BlueKelah]

You and I both know that noone is lending to Osim at a cheaper rate than you can get on a fixed deposit.

The upper ends of those rates are different currencies (with higher base rates) and the conversion option has real value which you're not including in your effective interest rate.

No view on Osim but it is a valid question what all the debt is for, and its not improving the capital structure like an above poster said if its just going to sit in excess cash.

We don't know what the currency breakdown or product structure the fixed deposits comprise of. Per the AR, most of the fixed deposits are held at parent company level, but we are unable to get a breakdown on the interest on those deposits.

The conversion option means that Osim is indirectly short call options on its own shares, indirectly a hedge against stalling growth. The transaction took place when Osim shares were trading at $2.80, so management was taking advantage of low cost equity funding. The low share price now offers the company a chance to hedge its exposure cheaply by performing buybacks, which the company is doing.

If interest rates rise and growth continues to stall, bond holders might redeem the bonds in 2017 instead of being locked in at low yields till Sept 2019. The conversion option is of course of significant value when the bonds were first issued. The value is significantly lower now with growth sputtering. I would think that management probably knew about the coming slowdown when issuing the bonds.

I view the bond issue as an opportunistic transaction by the management. Taking advantage of the chance to secure funding at favourable terms.

management must be laughing to the bank right now, make money from public and use that money to do share buyback and increase their own holdings %. Wonder if they are still thinking of expanding into Russia and Turkey. Maybe can use that as excuse to do another round of money raising.

if it drop back down below 10cents, it will become a classic story on the SGX. Cant recall any share that has had such crazy performance in such short a span of time.

-eagerly awaiting 5 cents and worms to crawl out of the massage chairs-