Osim

Osim: Maybank-KE riterates Buy on OSIM with TP raised to $3.50, fourth most bullish on the street. The house believes that the distribution channel synergy between high-end massage chair and high-end tea stores should not be underestimated. In-house estimates show massage chairs sales can move 1.5x faster in a high-end mall than a lower-end location. OSIM now possess the most advanced massage chair technology among its peers through extensive R&D, and its uInfinity and uDiva chairs can be cross-sold as high-end furniture. Effectively, it is breaking into a whole new market. The company is also expanding its presence in North Asia, particularly in affluent Greater China and South Korea, enrolling superstars Lee Min Ho and Sammi Cheng to be celebrity endorsers. TWG is also aggressively opening new stores and recently launched a luxury collection of teabags. The company commands a high net profit margin of 15.8% from all its luxury goods sales, this is higher than the average of 14.3% for global luxury brands such as LVMH, 9.9% for global specialty retailers such as Estee Lauder, and 8.3% for regional specialty retailers such as LÓccitane . It has an impressive balance sheet with short working capital cycle and has proven its ability in generating strong cash flow. In fact, after the conversion of CBs, the company may be sitting on as much as $300.9m cash, more than its total liabilities of $246.2m. OSIM is currently trading at 14.9x FY15E P/E, above its long-term historical average of 11.9x forward P/E but lower than its peers in global luxury goods (18.2x FY2 P/E), global specialty retailing (18.9x FY2 P/E) and regional specialty retailing (19.3x FY2 P/E). Maybank-KE deems the time-series premium in current prices as justifiable and pegs TP to 19x FY15 P/E. Latest broker ratings as follows: CIMB initiated Add at TP $4.60 RHB maintained Buy at TP $3.85 Standard Chartered maintained Outperform at TP $3.57 Maybank-KE maintained Buy at TP $3.50 Phillip Securities maintained Accumulate at TP $3.15