OSIM

OSIM: DBSV initiates coverage with Buy Call and $2.25 TP. House believe OSIM is no longer the entity it was before the write-off of Brookstone in FY08. Quarterly results from 1Q09 to 4Q12 have shown that earnings growth has been sustainable. OSIM is now a stronger entity and better positioned for further growth. Beneficiary of rising income in China. OSIM is a beneficiary of the rising middle class population in China, with 56% of revenues originating from North Asia. Rising disposable income, a strong Rmb and increasing availability of credit will encourage Chinese consumers to spend more. OSIM currently has 435 stores in North Asia including 278 stores in China. OSIM now creates demand by innovating new products to target new market segments. OSIM has better control over its technology with tighter IP protection. Other than massage chairs, its range of small products help to supplement growth. OSIM produces massage chairs of various sizes for customers to suit small and larger space requirements, as well as foot, head and waist massagers for specific customer segments. Project FY12-FY14F earnings to grow at CAGR of 16%, driven by China and product innovation. OSIM currently trades at 13.5x FY13F PE vs peers’ 18x. $2.25 TP is based on 16x forward FY13F earnings, translating to a PEG of only 0.9x.