OSIM

OSIM: Maybank-KE visited the company, where OSIM noted that it does not have a specific target for acquisition yet, but it is very clear on the kind of companies it wants to buy. They must be positioned at the mid- to upper end of the well-being and lifestyle market, have a promising brand, can be scaled up rapidly, is already in China or heading there, and have an interesting product with the potential to dominate its market. On recent concerns of its $170m CB’s dilution, the group notes that its CBs issued in 2011 actually did not dilute EPS much as OSIM repurchased 41m shares in 2011-13. These almost fully offset the 65m new shares issued when the Bond holders converted their shares. Mgt intends to repurchase shares in any market correction. So far in 3Q14, sales growth has been steady, with the group’s new sofa chair, uDiva (an upgraded version of UAngel) being progressively rolled out in China, to steady sales. TWG is focusing on North Asian expansion, where OSIM now owns 88% of TWG North Asia. There will be greater international expansion of its franchise business for chairs and TWG Tea in 2H14 and FY15. Maintain buy with TP $3.50.