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Private again, OSIM gets down to business
FREED from the weighty obligations of a listed company, recently delisted OSIM International will now be able to focus on its next phase of growth, says founder, chairman and chief executive Ron Sim.
The effort will see OSIM strengthen its corporate structures, while building up the brands in its portfolio, Mr Sim told The Business Times in his first media interview since it became a private company again.
"We listed in 2000. The listing was certainly a good thing. It helped the company become a lot more structured. You put in time and effort to ensure systems are right and structures are right. You have people in right positions to run a better company. It was a learning journey for 16 years," he says.
OSIM raised about S$30 million when it was listed in 2000. Earlier this year, he had to pay some S$300 million to privatise the company, Mr Sim notes wryly.
The self-made tycoon launched the offer in March to buy all the shares he didn't own in OSIM at S$1.32 a share. He later lifted the offer to S$1.37 a share, not including a two-cent dividend. A trading slip meant the ex-dividend figure had to be raised to S$1.39 after Vision Three (the takeover vehicle) bought OSIM shares on the market above the S$1.37 price.
The OSIM that Mr Sim took private is a very different entity from the one he brought to list on the Singapore Exchange (SGX).
Best known for its massage chairs, the healthy-lifestyle group today counts 1,196 outlets in 222 cities in 30 countries. Its stable includes brands such as health-food group GNC and luxury tea company TWG. When it first listed, it had about 100 stores.
Without the distractions of running a listed company, growing the group can now receive undivided focus, Mr Sim says. "Today, I have a great opportunity to restructure and grow it far bigger than what it is, over the next 5-10 years. There are a lot of opportunities to grow, not only for OSIM, GNC and TWG. There are many small companies in the pocket which we are also growing. Over time, we will have a brand and concept that we can regionalise, if not globalise. So it's full of opportunities.
"I'm 58 now. I'm still hungry, still young. I think I still have another good 15 years. I think I know the value of this company. I think I know how to grow it further."
One key task is to strengthen the corporate team in each entity.
"We will bring in more people over time. They will be corporate people who would have a wider perspective, believe in what we are doing and prepared to grow with us - more strategic in outlook but with an eye on opportunity.
"They will be a corporate team for the longer term and with a vested interest in growth. I don't believe in hiring and firing. You need to be mindful of the selection process and spend time developing and building affinity for the culture and goals of the company."
He is now still CEO of OSIM, despite the group having grown to encompass many companies. Eventually, the new corporate structure may see OSIM having a separate CEO along with the CEOs of other units reporting to him as group chairman and CEO, Mr Sim says.
OSIM will stay close to its core business even as it embarks on its next phase of growth. "I'm very much for consumer and cash-generating companies. What I look for will be lifestyle, well-being and healthcare businesses."
Digital disruption is to be embraced, not feared. "Certainly, the digital world has disrupted everything. It's a very powerful tool that one can use. If one is not a specialised retailer, if one is a trader, you'll be totally disrupted. But if you create aspirational concepts and innovative products and create an experience, you can win. Digital is a tool we can leverage.
"While it disrupts you in some ways, it challenges all businesses to take a deeper look to innovate and improve. I see it as an opportunity for the next leap rather than just disruption.
"For online, we created a separate line in China. What we sell online and offline is different. I think we need to keep the difference because online is very much a discount strategy."
Premium OSIM products are also offered online, but with no discount. "It's a good platform for building awareness, it's like another advertising channel. But we do not want to slash prices."
Online sales do not currently account for a significant share of revenue, but are growing every year in China and could account for 10 per cent of sales in the next few years, according to Mr Sim.
He does not see OSIM becoming a big investor in startups. "In the past, I did embark on some startups but these days, I don't think it's easy to do a startup. We are not a fund, we're investing with our own money, and it's unlikely we'll take a big risk, unless it's something so special. We prefer to invest in something with a track record, something we can see rather than something we're unsure of."
While acknowledging the value of the listing experience, Mr Sim makes no bones about why he delisted OSIM: the rising burden of compliance.
"It's good to have compliance and corporate governance but I think it's not good to have over-compliance and over-governance."
He has made known some of his key grievances: mandatory quarterly reporting, and the separation of the chairman and CEO roles.
"Quarterly reporting destroys company value. It is too short-term, it doesn't help in any way making the company more transparent. It should not be done just for shareholders. What is more important is the company. The company needs time to build, and quarterly reporting does not provide that time and creates obstacles to building a valuable company."
SGX has started a review of quarterly reporting and Mr Sim hopes such concerns will be considered.
He feels strongly too that the separation of the chairman and CEO roles should not be applied with a broad stroke. "I disagree that the chairman and CEO cannot always be the same person. We need to understand that there are institution-led companies, there are government companies, there are family-run companies, there are founder-run companies. Why must a one per cent (ownership) CEO and a 51 per cent CEO live by the same rules, when ownership determines the mindset? The 51 per cent CEO, 'die die' must do. The one per cent CEO, he can always go.
"Ownership counts. Whether one per cent or 51 per cent, it's a big difference."
More recent requirements, such as sustainability reporting and new lease accounting rules, will make things even more difficult for companies, especially smaller ones, Mr Sim says.
"Things like these worry me. Sustainability report . . . what does it mean? It's meant to be a report on what a company wants to do to make things good. But if you look at the details, it is like giving away all competitive elements and giving a projection. So I think it's overkill and unneccessary."
New leasing accounting rules soon coming into force will change a company's liabilities by including leases in their books, be it real estate, large equipment or vehicles. When it comes into effect, almost all leases will have to be recognised as "right of use" assets with corresponding lease liabilities. This will have an impact on tenants' key financial metrics, including increased leverage ratios and potentially lower return on assets.
"Certain groups will win, certain groups will lose. All the Reits (real estate investment trusts), all the property companies, will be alright, but the business operators will suffer. Why must we do this?"
Singapore, he says, should not just blindly adopt rules and practices from developed markets, as there are major difference in corporate structures and ownership. "When it comes to governing, we don't take every-thing from Western democracy - because it may not work for us. It should be the same for the financial markets. We should take what is good for us; what is not, we shouldn't. We need to find a system that works for us."
So would he list again? "I might, some day. There have been lots of offers, to go to China, go to Hong Kong. We'll see how it goes. Singapore? Ha ha - you never know. If the rules change, and the vibrancy changes, you never know."