Brokers' Take

Osim International, Sept 7 close : $0.985

08 September 2004
The Business Times

Citigroup Smith Barney, Sept 7

INITIATING coverage (of Osim) with a BUY/Low Risk rating and a 12-month target price of S$1.30, based on a 2005E P/E (price-earnings ratio) of 14.0 times - towards its historical mid- to high-range (its previous peak was 18.3 times).

Osim has a self-developed, well-recognised global brand; Interbrand values Osim brand at S$203 million, versus its market cap of S$441 million. It expects to add 100 outlets this year to its existing 495 in 83 cities worldwide. China is a strong market, and we forecast revenue CAGR (compounded annual growth rate) of 60 per cent in 2003-06 from there. Its recent share price fall has little to do with company news; we would use this opportunity to buy into a group with robust operations.

We expect a three-year (2003-06) EPS (earnings per share) CAGR of 29 per cent. Trading at 10.6 times 2005E P/E and a PEG (price-earnings to growth) of 0.37 times, the stock looks attractive. We expect average ROE of 30 per cent over next three years.

Compiled by KENNETH LIM