V3's HK IPO journey not smooth sailing for Osim founder

Singapore

AS the corporate world pushes out a final flurry of initial public offerings (IPOs) ahead of the year-end lull period, not everyone who started the listing process has made it to the finish line.

Osim founder Ron Sim's repackaged massage chair and lifestyle products group, V3, signalled in April its intention to relist in Hong Kong, but seems to have fallen off the radar in recent weeks.

In contrast, Razer, another Singapore firm that applied for a Hong Kong IPO at the end of June, months after V3, has already prepared the market for a Nov 13 listing.

In light of Razer's progress, investors following Osim's journey may be wondering if V3's IPO will still happen.

Technically, V3's IPO application lapsed last month, six months from the day Mr Sim submitted pre-listing documents to the Hong Kong Stock Exchange, its website shows.

Currently, Mr Sim still has a three-month window from the start of October to update his application and revive the listing process.

But if he misses that window, the application proofs submitted in April would be out of date by the end of the year, as dictated by exchange rules. This would mean Mr Sim and his bankers would have to resubmit the application.

Listing is often a long and tedious process, but one question being asked by observers now is whether delisting in Singapore to relist in Hong Kong is necessarily the best option for all Singapore companies.

At the end of September, it was reported that the V3 Group was meeting investors to gauge demand for its proposed IPO. But the company has remained quiet since then. The sticking point is likely to be the valuations, sources say.

Osim International was valued by Mr Sim at S$1 billion before its delisting from the Singapore Exchange on Aug 29 last year, based on his final offer price in the buyout. But the valuation he is seeking now is said to be significantly higher.

Mr Sim declined to comment.

At Osim's peak in 2014, it had a market cap of S$2 billion, but that was before revenue started falling every quarter from 2015, Bloomberg data shows. Supposing that the same company wanted to command a S$2 billion market cap today, this would work out to a price-to-earnings (PE) ratio of about 38 times, based on 2016 earnings.

Stocks on the Hong Kong mainboard, which is where V3 was planning to list, trade at an average PE of 15.7, based on the HKEX website. Stocks on the smaller GEM board have an average PE of 37.5.

In Singapore, Osim last traded at a PE of about 20 times.

To be sure, one main difference between V3 and Osim is that the group would also include an investment in Futuristic. Under the IPO's plans, Osim would acquire a stake of up to 75 per cent in Futuristic, a Singapore-based manufacturer of store fixtures that turned a profit of S$12.7 million in 2016.

V3's net profit for 2016 was S$52.4 million, up 5.2 per cent from 2015, although revenue fell 6.8 per cent to S$577.6 million.

V3 describes itself as an Asian luxury group with two luxury lifestyle brands, Osim and TWG Tea. But in the age of Amazon, investors may be more concerned with V3's bricks-and-mortar image than its brand strength, market observers said.

Shares of New York-listed GNC Holdings, the health and nutrition supplements retailer, have crashed 50 per cent over the past year, as investors remain doubtful that its transformation plans will drive margin or cash flows. V3 owns exclusive franchise rights to the GNC brand in Singapore, Malaysia and Taiwan.

Still, V3 is eyeing expansion plans and has said it would spend IPO proceeds on store openings, store upgrades, as well as more branding and marketing activities.

Osim's journey to Hong Kong continues to be an interesting one to follow.