OSIM

OSIM: StanChart reiterates its Outperform rating and raised TP to $3.57, on the back of higher long-term growth forecast of TWG Tea, underpinned by sales growth in 2014 from its new massage chair, uDiva, (launched in Apr). In 1Q14, TWG Tea opened four new stores, and in Apr it added another three. It currently has 33 stores and management plans to reach 45 by year end. Management said the new stores have reported strong results, as they were opened in high-traffic, upmarket locations, including elite malls and airports. With $265m in cash, house reckons that OSIM has significant flexibility to pursue acquisitions. In the past, management said their M&A criteria included: (1) strong brands targeting the middle-upper income segment, (2) specialty retail concepts, and (3) strong cash flow generation. StanChart believes small acquisitions are a good fit for OSIM, as management understands branding and how to build a regional network. OSIM currently trades at 15.9x 2015E PER, an 11% discount to the ASEAN retailer average of 17.9x. However, on a growth-adjusted basis, OSIM trades at 0.7x, a 38% discount to ASEAN retailers’ price-earnings growth of 1.2x.