- TWG Tea to strengthen OSIM’s brand and help to generate higher sales per outlet for massage chairs.
- New uInfinity and uDiva massage chairs are the best ever, with uDiva’s 30% price rise a powerful revenue catalyst.
- Raising FY14E-15E forecasts by 4% and 5%; TP raised to SGD3.50. Maintain BUY.
We believe the combination of TWG Tea and OSIM’s massage chair business will allow OSIM to break new ground this year and next. As coverage is transferred to the author, our FY14E-15E forecasts are raised by 4% and 5% respectively to 5-6% above consensus, and TP upped to SGD3.50 (based on 19x FY15E P/E), in line with regional and global peers, and a deserved premium to its historical mean.
Have a tea after a massage
We do not know when or where or how the custom of serving a cup of tea after a massage came about but they blend in well. As such, we believe OSIM’s high-end tea purveyor TWG Tea will prove to be a great and natural fit for its massage chair business, and help it to break into higher-end locations where sales per outlet can be up to 1.5x higher than lower-end locations. All TWG stores are located in high-end destination malls.
Bullish on the new chairs
After extensive product testing, we think OSIM’s new uInfinity and uDiva chairs deserve to outsell every other generation of chairs and the competition as well. Simply put, this is as close to a human massage experience as one will ever get. In addition, the new chairs are set to enter homes as high-end furniture. Even the uInfinity’s leg module can be flipped over to become an ottoman, turning it into a luxury lounger. Lastly, we expect the change in celebrity endorser to Korean star Lee Min Ho for uDiva to help OSIM tap into a larger target market. Despite a 30% price rise, uDiva is still affordable.
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