OSIM reported a 1 per cent y-o-y growth in Q4 2011 earnings to S$17.1 million, on the back of an 8 per cent y-o-y growth in revenue to S$142.7 million. Stripping out the S$5 million one-off asset gain in Q4 2010, core earnings grew by 43 per cent. FY11 earnings rose 38 per cent y-o-y to S$69.1 million, on the back of a 9 per cent growth in sales to S$553.7 million.
These however fell short of our expectations by 8 per cent and 6 per cent, respectively, largely due to more aggressive store rationalisation which saw the number of OSIM outlets decline by 16 to 592 in FY11.
We lower our FY12 sales and earnings by 10 per cent and 8 per cent, respectively, to take into account further store rationalisation, especially with regard to RichLife which currently has 104 outlets in 17 cities and would be scaled back to focus on seven key cities.
The focus going forward would be on store profitability rather than the number of stores, hence we expect further margin expansion in FY12.
A final dividend of one cent was declared, bringing total FY11 payout to three Singapore cents. We maintain our 'buy' call on the stock with a higher TP of S$1.59 (previous S$1.55), as we roll over our valuations to 15 times FY12.
BUY
BUY
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