OSIM International Ltd (OSIM) reported a 16.1% YoY jump in its 3Q13 PATMI to S$22.8m on the back of a 7.5% increase in revenue to S$153.0m. Bottomline closely matched our forecast of S$23.0m although revenue was 5.3% below our projection. An interim dividend of S$0.01/share was declared, in-line with our forecast. We are positive on OSIM’s recent increase in effective shareholding in TWG Tea to a controlling stake as we believe the latter has strong growth prospects. We take into account the consolidation of TWG Tea’s financials in our model. Our fair value estimate is raised from S$2.40 to S$2.56 as we lift our FY14 PATMI forecast by 2.0% and roll forward our valuations on OSIM to 16.5x FY14F EPS. Reiterate BUY.
3Q13 sales slightly below but PATMI within expectations
OSIM International Ltd (OSIM) reported a 16.1% YoY jump in its 3Q13 PATMI to S$22.7m on the back of a 7.5% increase in revenue to S$153.0m. Bottomline closely matched our forecast of S$23.0m although revenue was 5.3% below our projection. This was largely due to higher-than-estimated share of profits of associated companies (mainly from TWG Tea) and a lower effective tax rate. Management updated us that China contributed strongly during the quarter despite its high-end uInfinity massage chair being launched there only in Sep. Hence, we expect this momentum to continue for OSIM’s largest market in 4Q13, as there will be a full quarter of contribution from uInfinity. An interim dividend of S$0.01/share was declared, in-line with our forecast and this brings YTD declared dividends to S$0.04/share. For 9M13, revenue and PATMI grew 4.9% and 15.0% to S$469.1m and S$74.0m, respectively.
Now holds a controlling stake in TWG Tea
OSIM recently announced that it has increased its shareholding in TWG Tea Company from 45% to 53.7%, thus effectively granting it a controlling stake in TWG Tea. The purchase consideration was US$7.2m, which implies an equity valuation of ~S$103.4m for TWG Tea. Based on our channel checks, we note that TWG Tea recently turned profitable in FY13 (FYE Mar), with revenue of S$42m and net profit of S$5.6m. We believe this point of inflection presents immense growth potential for OSIM ahead, given that TWG Tea is still very much in a nascent stage of growth, in our view.
Maintain BUY
We take into account the consolidation of TWG Tea’s financials in our model. Our FY13 revenue forecast is trimmed only marginally by 0.2% as 4Q (calendar year) is seasonally TWG Tea’s strongest quarter (due to festive Christmas period). Our FY13 PATMI forecast is raised by 0.5%. For FY14F, our revenue and PATMI projections are lifted by 4.6% and 2.0%, respectively. We also roll forward our valuations on OSIM to 16.5x FY14F EPS, which correspondingly raises our fair value estimate from S$2.40 to S$2.56. Reiterate BUY.
OSIM International Ltd (OSIM) reported a 16.1% YoY jump in its 3Q13 PATMI to S$22.7m on the back of a 7.5% increase in revenue to S$153.0m. Bottomline closely matched our forecast of S$23.0m although revenue was 5.3% below our projection. This was largely due to higher-than-estimated share of profits of associated companies (mainly from TWG Tea) and a lower effective tax rate. Management updated us that China contributed strongly during the quarter despite its high-end uInfinity massage chair being launched there only in Sep. Hence, we expect this momentum to continue for OSIM’s largest market in 4Q13, as there will be a full quarter of contribution from uInfinity. An interim dividend of S$0.01/share was declared, in-line with our forecast and this brings YTD declared dividends to S$0.04/share. For 9M13, revenue and PATMI grew 4.9% and 15.0% to S$469.1m and S$74.0m, respectively.
Now holds a controlling stake in TWG Tea
OSIM recently announced that it has increased its shareholding in TWG Tea Company from 45% to 53.7%, thus effectively granting it a controlling stake in TWG Tea. The purchase consideration was US$7.2m, which implies an equity valuation of ~S$103.4m for TWG Tea. Based on our channel checks, we note that TWG Tea recently turned profitable in FY13 (FYE Mar), with revenue of S$42m and net profit of S$5.6m. We believe this point of inflection presents immense growth potential for OSIM ahead, given that TWG Tea is still very much in a nascent stage of growth, in our view.
Maintain BUY
We take into account the consolidation of TWG Tea’s financials in our model. Our FY13 revenue forecast is trimmed only marginally by 0.2% as 4Q (calendar year) is seasonally TWG Tea’s strongest quarter (due to festive Christmas period). Our FY13 PATMI forecast is raised by 0.5%. For FY14F, our revenue and PATMI projections are lifted by 4.6% and 2.0%, respectively. We also roll forward our valuations on OSIM to 16.5x FY14F EPS, which correspondingly raises our fair value estimate from S$2.40 to S$2.56. Reiterate BUY.
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