Brokers' Take

Osim International, Dec 10 close : 84.5 cents

11 December 2004
The Business Times

Citigroup Smith Barney, Dec 10

OSIM'S recently launched leg massager product, the iSqueeze, has met with significant success with it currently sold out in Singapore, Malaysia and HK.

Its prospects are solid with planned launches in China and Taiwan in 2005. The group's key markets have seen healthy growth so far in Q4 and the outlook into 2005 is positive with new products to hit the shelves, as well as more appealing stores with the planned remodelling of several of them.

Having completed the incubation and development expenses of its new products, along with revenue increases in Q4 on the back of the successful launch of iSqueeze, we expect margins to expand sequentially.

We re-iterate our Buy/Low Risk (1L) rating on Osim with a 12-month target price of S$1.20.

Currently trading at 9.8 times FY05E earnings with a price earnings to growth (PEG) of 0.4 times, along with a healthy and growing brand equity, we believe valuations are attractive.

Valuation: Trading at 9.8 times 2005E earnings and with a three-year earnings per share compound annual growth rate (EPS CAGR) of 24.8 per cent in 2003-06E, the group's PEG of 0.4 times looks attractive.

Our 12-month target price of S$1.20 is based on a 2005E price earnings (P/E) of 14 times, which is towards the mid to high end of its historical range (its previous peak was 18.3 times) in recognition of the group's healthy growth rates and strong brand equity. We use P/E as our primary valuation methodology as the group's activities and growth prospects are earnings-driven. BUY

Compiled by JOYCE KOH