WE had a firsthand look at the eagerly awaited new chair (uInfinity), which has just been soft-launched in Hong Kong. This chair will replace the existing uDivine, which has been the flagship for the past three years. Initial selling price was HK$46,800 (S$7,630), almost 35 per cent above the existing uDivine App.
Singapore's selling price would likely be in the S$6,000+ range. This will likely be soft-launched in Singapore and China over the next few weeks.
Upon testing, what struck us immediately was the much better massage mechanism, even compared to uDivine which was considered a revolutionary technology. The leg portion has also been given a significant upgrade, feeling similar to the popular leg massager uPhoria. The chair feels much more snuck, owing to the slightly smaller profile, though the sales assistant was quick to assure that even plus-sized customers can still fit comfortably!
We were, however, slightly underwhelmed by the similarity in design to its predecessor. Our view is that this could result in less power drawing in customers at the shops, and OSIM would have to run an effective marketing campaign to counteract this. We understand there are plans in place, which will come in during the official launch.
OSIM will announce after market close on July 30. For the quarter, we are expecting revenue and profit growth of 15 per cent and 18 per cent (S$26.5 million), respectively.
Growth will likely be driven by sale of the uAngel, which will have a full quarterly effect and some spillover orders from Q1 2013. Gross margins may see a marginal downtick due to the lower prices of uAngel, though we would expect this to be balanced against higher prices of the uInfinity.
We trim our earnings forecast by 2-3 per cent on lower revenue estimates. Earnings upside could come from better than expected sales of the new flagship massage chair, which we estimate accounted for as much as 50 per cent of sales historically.
Our target price of S$2.53 remains pegged to 18 times FY2013 forecast (translating into 20 times upon exercise of convertible bonds), implying one time PEG (price-earnings to growth ratio). Maintain "buy".
BUY
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