We expect OSIM International’s (OSIM) business to remain resilient despite concerns resurfacing over China’s economic growth. This would be driven by continued efforts by management to enhance its product appeal through innovative new products such as the recently launched uAngel Sofa-Tranzformer and productivity gains to boost its margins. Although similar concerns over China’s economy also transpired last year, OSIM still managed to deliver positive YoY growth in its topline and bottomline for all four quarters of 2012. We maintain our BUY rating on OSIM with an unchanged fair value estimate of S$2.19, still pegged to 16.4x FY13F EPS. The stock is trading at 14.2x FY13 and 12.8x FY14 EPS, while offering FY13F dividend yield of 3.2% and ROE of 42.8%.
Concerns resurface over China, but OSIM to remain resilient
Jitters over the economic growth of China, which is OSIM International’s (OSIM) largest market (~25% of revenue), recently resurfaced again, following disappointing industrial production and retail sales figures. The latter grew 12.3% YoY for Jan-Feb 2013, which trailed the street’s expectations (Bloomberg consensus average: 14.9%). Nevertheless, we note that last year, there were also concerns over the impact of China’s economic slowdown on OSIM. However, OSIM still managed to deliver positive YoY growth in its topline and bottomline for all four quarters of 2012. We believe this reflects the efforts put in place by management to enhance its product appeal through innovation and productivity gains to boost its margins, which also showcases the resilience of OSIM’s business. In addition, we believe that our revenue forecast for FY13 has already taken into account the uncertainties over China’s economic growth, as it is 2.8% below Bloomberg’s consensus forecast. We do, however, remain cognisant that there could be downside risks to our estimates should economic conditions and sentiment deteriorate further.
Expect at least two major product launches in 2013
The uAngel Sofa-Tranzformer, one of OSIM’s new flagship products for 2013, was first launched in Malaysia and Hong Kong at the start of the year. It was recently launched in Singapore and Taiwan, and will next be sold in China. We view this as an important development for OSIM as uAngel allows management to capture a new target group of young working female adults and thus provides a platform for OSIM to diversify its customer base. OSIM’s next product pipeline would be a new high-end massage chair (selling price likely to be comparable to uDivine), and we expect this to be launched in 2Q or 3Q 2013 and endorsed by international artiste Andy Lau.
Maintain BUY
OSIM is trading at 14.2x FY13 and 12.8x FY14 EPS, while offering FY13F dividend yield of 3.2% and ROE of 42.8%. Maintain BUY with an unchanged fair value estimate of S$2.19, still pegged to 16.4x FY13F EPS.
Jitters over the economic growth of China, which is OSIM International’s (OSIM) largest market (~25% of revenue), recently resurfaced again, following disappointing industrial production and retail sales figures. The latter grew 12.3% YoY for Jan-Feb 2013, which trailed the street’s expectations (Bloomberg consensus average: 14.9%). Nevertheless, we note that last year, there were also concerns over the impact of China’s economic slowdown on OSIM. However, OSIM still managed to deliver positive YoY growth in its topline and bottomline for all four quarters of 2012. We believe this reflects the efforts put in place by management to enhance its product appeal through innovation and productivity gains to boost its margins, which also showcases the resilience of OSIM’s business. In addition, we believe that our revenue forecast for FY13 has already taken into account the uncertainties over China’s economic growth, as it is 2.8% below Bloomberg’s consensus forecast. We do, however, remain cognisant that there could be downside risks to our estimates should economic conditions and sentiment deteriorate further.
Expect at least two major product launches in 2013
The uAngel Sofa-Tranzformer, one of OSIM’s new flagship products for 2013, was first launched in Malaysia and Hong Kong at the start of the year. It was recently launched in Singapore and Taiwan, and will next be sold in China. We view this as an important development for OSIM as uAngel allows management to capture a new target group of young working female adults and thus provides a platform for OSIM to diversify its customer base. OSIM’s next product pipeline would be a new high-end massage chair (selling price likely to be comparable to uDivine), and we expect this to be launched in 2Q or 3Q 2013 and endorsed by international artiste Andy Lau.
Maintain BUY
OSIM is trading at 14.2x FY13 and 12.8x FY14 EPS, while offering FY13F dividend yield of 3.2% and ROE of 42.8%. Maintain BUY with an unchanged fair value estimate of S$2.19, still pegged to 16.4x FY13F EPS.
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