Osim Drops by Most in 3 Months on Convertibles: Singapore Mover

Osim International Ltd., Asia’s largest maker of massage chairs, dropped by the most in almost three months after a sale of S$170 million ($136 million) convertible bonds sparked concern the company is preparing for a big acquisition.

Osim dropped 2.8 percent, the biggest decline since June 5, to S$2.74, after falling as much as 6.4 percent earlier. Given that the company already has cash on hand of about S$300 million, the fundraising exercise could be in preparation for a “big acquisition,” Chirag Saglani, an analyst at UBS AG in Singapore, wrote in a note to clients.

“Given the already strong cash position, we believe this issuance means that there could be a potential acquisition around the corner,” Saglani said. “If not, capital efficiency would be a concern.”

Proceeds from the sale of zero-coupon convertible bonds will be used to fund potential acquisitions, expansion plans and general working capital requirements, Osim said in a statement to the Singapore bourse today. The notes can be converted into equity at S$3.525 per share, it said.

“We believe the terms are very favorable and it is a relatively cheap source of funding for the company,” James Koh, an analyst at DMG & Partners Securities Pte. in Singapore, wrote in a note to clients. “The issuance is expected to buff up Osim’s war chest even further and put it in a comfortable position to capitalize on merger and acquisition opportunities.”

The company is in talks to expand its international franchise with stores in Turkey and Russia, Osim’s Chief Executive Officer Ron Sim said in an interview this month. The move will complement fast-growing economies including China, which Sim said is it’s top market with almost half of its 578 stores worldwide.