- More than 40 funds packed NDR with top management, following disappointing 1Q15.
- OSIM still in investing mode & looking for next big M&A
- Expected share buybacks could open up trading opportunities in the short term. Maintain HOLD with SGD2.08 TP still at 18x FY15 P/E.
Management’s key message: OSIM has embarked on preparations for its next leap forward, having grown non-stop for the past six years. Pending completion, performance could be volatile. It will be focusing on its core chair business, TWG and possibly a yet-tobe-identified new business.
OSIM: scaling up products across multiple price points
OSIM already has chair products that cost SGD2k (uDiva), SGD5k (uMagic) and SGD7k (uInfinity). Volume could build up rapidly when their 3-5-year replacement cycle is ready ie when starter-buyers upgrade to their next price points. Those points may not be reached until 2017. Until then, OSIM will be exposed to macro vagaries and consumer acceptance of its new products.
TWG: wants to be in 10 Chinese cities
TWG now has central kitchens in Guangzhou, Beijing and Shanghai. This will not be the end. It wants to be in at least 10 major cities. This means TWG will remain in investment mode for some time, even as its earlier cities turn profitable. It needs 4-5 stores to provide enough revenue to cover costs of investment and overheads of the central facilities.
Still looking for next big M&A
OSIM has not yet seen anything it wants to buy or at the right price. CEO Ron Sim pointed out it is not just OSIM’s cash but also his 60% ownership at stake. Hence, he is willing to wait.
Looking to buy back shares
When queried on share repurchasing, Ron replied he is “happy to buy back”. In the past three years, OSIM has consistently mopped up shares at below SGD2.00.
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