OSIM International Ltd announced last evening that it has entered into a subscription and purchase agreement with TREK 2000 International Ltd for a strategic investment purpose. TREK 2000 was listed on the SGX mainboard since 2000, and engages in the field of Interactive Consumer Solutions and Security Solutions. OSIM intends to work with TREK 2000 on the commercial application of its patents and technology for products in the wellness and healthy lifestyle sectors.

OSIM is an existing shareholder of the company, whereby its stake will increase from 1.14% to 8.75% following a subscription for 24m new ordinary shares and 1m treasury shares at S$0.4365/share. The total consideration is S$10.9m, and this investment amount is not significant in view of OSIM’s net cash position of S$256m as of 31 Mar-15.

We have a HOLD rating on OSIM with fair value estimate of S$1.87. Do note that the share price has corrected recently, down to as low as S$1.62, partially taking into account an expected set of muted 2Q earnings. As such, for the longer term investors, the price correction has also opened up an opportunity to slowly accumulate this stock in anticipation of an improved outlook for the 2H of its financial year.

Source: OCBC Research - 25 Jun 2015