Brokers' Take

Osim, July 22 closing : $1.10

23 July 2004
The Business Times

G K Goh Research, July 22

THE 26 per cent growth in interim net profit to $13.6 million was within expectations. But in terms of earnings quality, this must be Osim's most lacklustre showing. Ebitda grew only 5 per cent as the company felt the pressure of higher costs of purchases because of the strong yen.

Development costs also increased, for which the new products will only be launched in H204.

The bottom line was underpinned by the full six-month impact of 24 per cent-owned Global Active, as well as a lower tax rate (15.8 per cent versus 17.5 per cent). H2 will see exciting new products. Many of these are smaller, lower-value items, which generally earn slightly higher margins than massage chairs.

With the industry liberalisation, Osim is expanding into the China retail market. It currently distributes its products in China via a licensing agreement. It is adding 70 points of sale in H2, which is double the number of new points of sale in H1. China and its global franchisees will continue to lead growth. New franchised markets include Korea and India. Maintain BUY and DCF value of $1.20.

Compiled by VEN SREENIVASAN