Osim International, Asia’s biggest maker of massage chairs outside of Japan, is planning to list Taiwan depositary receipts (TDR) on the Taiwan Stock Exchange (TWSE) to take advantage of the booming Asia Pacific economy and rising disposable incomes during a climate of low interest rates.

The TDR listing aims to broaden and diversify the company’s shareholder base and provide it with an additional fund-raising platform for future expansion. Osim had previously mentioned that it would consider acquiring new brands in China to boost its presence in that country. The listing will also “strengthen public awareness of the Osim brand in Taiwan, which has been a key market for Osim products since 1987,” the company said in a statement on Dec 2.

 

In addition, Osim will be releasing its treasury shares as TDRs to be listed on the TWSE in order to protect its shareholders from dilution. Treasury shares are those that have been bought back and are currently available for resale. “We view the proposed TDR listing positively as it enables the Group to monetise its treasury shares without diluting existing shareholders holdings,” Melissa Yeap of DMG & Partners wrote in a report on Dec 3.

 

During the nine months to Sept 30, 2010, Osim had spent some $37 million in buying back its own shares on the market. As of Nov 22, it had accumulated up to 42.6 million treasury shares, representing 6.4% of its total issued shares. Its latest share buyback was on Nov 19, with 1.2 million shares purchased at $1.30 apiece. 

 

The company’s move comes hot on the heels of several other SGX companies which have also listed TDRs of over the past year. As credit unfreezes and companies embark on the growth path once again, listing depository receipts in other countries are an easier option to raise capital and avoid the tedious and expensive requirements of going for an initial public offering.

 

Currently, 24 companies have their TDRs listed on the TWSE, 10 of which are from Singapore. These include Yangzijiang Shipbuilding, Super Group, BH Global Marine, United Envirotech, Hu An Cable and most recently, Z-Obee Holdings, whose TDRs began trading on the TWSE on Dec 3 at NT$10.25 (44.2 cents) each.

 

So far, the TDR market has proven to be in a bright spot. Recent statistics released by TWSE showed that the average transaction volume of TDR’s was 6.03 times that of the companies’ home market during the first eight months of the year. For instance, TDRs of Yangzijiang – the first Singapore-listed company to list on the TWSE on Sept 8 – closed on Dec 3 at NT$21.7 each, up 15% from their debut price of NT$18.8, while those of United Envirotech are up 94% since they began trading on Oct 22.

 

Meanwhile, shares of Osim have surged 6.1% to a 52-week high of $1.56 apiece since news of its TDR listing went public on Dec 1. The stock is up a whopping 194% this year. In March last year, during the darkest period of the recession, shares of Osim had exchanged hands for as little as 5 cents apiece.

 

For the nine months to Sept 30, 2010, the company posted a 61% y-o-y increase in profits to $25.8 million on the back of a 12% surge in revenues to $376 million during the same period. The company expects consumer demand for its products to continue rising , especially in China, and this year launched the uSoffa Petit and uSoffa, the world’s first massage sofa.

 

The company has also caught the favour of local analysts, all of whom have endorsed the stock with buy, outperform and overweight calls. “The proposed listing may lead to a bumper dividend or M&A deal…we expect the market to react positively to the impending listing and the counter should see some strong buying interest,” writes Yeap of DMG. She has upgraded her valuation on Osim to $1.66 each from $1.57 before, giving it an upside of 6.4%.