The Straits Times / The Business Times News on OSIM

OSIM's stock reaps benefit of solid earnings growth

OSIM International's share price has surged 20 per cent over the past three weeks to close just a shade off its historic high of $1.35 in April last year.

The counter closed two cents lower at $1.28 yesterday, after hitting $1.30 last Friday and analysts reckon it could rise even further - to as high as $1.95.

The latest spurt of keen interest in OSIM appears to be based simply on the sheer success of its core healthy lifestyle retail business.

Also, adding more zing is an acquisition strategy that is beginning to pay off.

OSIM's stock has risen 46 per cent since January, easily outpacing the Straits Times Index which rose 13 per cent in the same period.

The company posted record earnings for the March quarter and followed this up with another strong showing in the quarter ended June 30.

OSIM's half-year profit was $20.1 million, a 53 per cent jump over the same period in the previous year and a company high which well exceeded market expectations.

'OSIM's record performance reflects strong earnings growth momentum that could exceed the group's long-term net profit growth target of 20 to 30 per cent,' said DBS Vickers analysts, who have raised their one-year price target to $1.71 from $1.38.

Citigroup Smith Barney's Mr Kevin Chong, who raised his target price to $1.58 from $1.23, said OSIM's growth will be bolstered by the introduction of several products over the coming months.

He also pointed out that operations at OSIM's recently bought subsidiary, Global Active, should improve now that there is stability at the helm of the nutritional products distributor.

Global Active made the headlines earlier this year over a spate of top management changes involving the company's founder and chief executive. This was resolved when suspended chief Cynthia Poa was reinstated in April.

CLSA analysts said OSIM's upcoming acquisition of American retail chain Brookstone should provide an immediate 8 per cent boost to its bottom line. At the same time, the acquisition would allow OSIM to sell its products in the United States through Brookstone's store network.

And that could warrant yet another upgrade to their target price, which they had revised last Wednesday to $1.95.