Brokers' Take

Osim International
Sept 26 close: $1.34

DBS VICKERS SECURITIES, Sept 26

OSIM and consortium partners Temasek Holdings and JC Child Associates should be able to complete the takeover of Nasdaq-listed Brookstone Inc. Based on our calculations, the deal values Brookstone's equity at US$445 million, to be financed by US$242 million of equity, US$200 million debt and US$2 million cash.

Osim's contribution of $145 million will give it an effective stake of 55 per cent in the company. This and the recent acquisition of Global Active have transformed Osim into a global player in the health lifestyle space with 1,010 outlets across more than 100 cities.

Through Brookstone, Osim can introduce its healthy lifestyle products and high-end massage chairs into the United States via Brookstone's 292-store retail network across 41 states in the US. Brookstone can also reap key synergies by leveraging on Osim's Asian sourcing network, thus reducing middleman layers and improving gross margins.

The deal has opened up immediate access to the US market for Osim and expansion opportunities for Brookstone's innovative store concept in Asia. It would have taken Osim more than 10 years to duplicate Brookstone's existing network organically.

Supported by the highly experienced Brookstone management, we believe the odds of a successful post-merger performance are high. We reiterate our 'buy' rating with a target price of $1.71 based on 13x FY06 PE.
BUY

Compiled by UMA SHANKARI