The Straits Times / The Business Times News on OSIM

Osim sees half of sales coming from US, Europe

Boost expected in five years following Brookstone takeover

OSIM, which makes massage chairs, expects to generate over half of its sales in the United States and Europe within five years following its recent takeover of US specialty retailer Brookstone.

The firm, which made record sales of S$332 million last year, should see annual revenues rise to over S$1.3 billion, helped by an expanded global network of 1,024 stores after the US purchase, chief executive Ron Sim said.

While Osim's products range from vaccuum cleaners to water filters, Mr Sim is betting that consumers in the US will fork out as much as US$4,000 for a leather massage-recliner. 'In the American context, health and fitness are very much about nutrition and exercise and not about relaxation. So it's an infant market and there is tremendous potential for us,' Mr Sim said, adding that there was growing awareness of alternative healthcare in US and Europe.

Osim has begun selling its range of massage chairs - including high-end models with built-in speakers - to Brookstone's 292 shops in the US. 'It's about design and creating the features and functions. At every thousand-dollar range up to S$8,000, there will be a chair,' he said.

The firm, with a stockmarket valuation of S$646 million, generates most of its sales in Asia, while Europe and America account for only 3 per cent of turnover currently. The proportion of sales coming from the US and Europe will probably exceed 50 per cent in the next five years, he said.

Mr Sim, 46, expects to boost spending on advertising to 10-20 per cent of Osim's total sales, from 5-10 per cent.

Some analysts expressed concern at the level of debt that the firm would take on when it led a consortium including Temasek Holdings and US private equity firm JW Childs Associates LP in the US$456 million acquisition of Brookstone.

Osim paid US$90 million - raised from bank loans - for its 55 per cent stake, going from a net cash position to a gearing ratio of about 1.2 times. 'Our gearing level is relative to our strategy. It would have taken us at least 10 years to build a similar retail network in the US. This is far more advantageous and the cost of credit is very cheap,' Mr Sim said.

Mr Sim also dismissed concerns that the firm's almost simultaneous takeover of Global Active Ltd, a loss-incurring Singapore nutritional supplements retailer, would stretch its resources.

Osim, which will announce its July to September quarter results next Wednesday, has seen its share price rise 63 per cent in the year so far. The shares fell 3.5 per cent to S$1.39 yesterday. - Reuters