OSIM

OSIM: (S$1.445) 3Q15 earnings sink on declining sales and TWG costs
OSIM tumbled 10.2% to $1.445 in morning trades after it reported a botched 3Q15 results, which widely missed the mark as net profit plunged 62.4% y/y to $6.2m on weak sales across its core markets. This brought its 9M15 earnings to $42.1m, making up just 49% of FY15 consensus estimate.

For the quarter, revenue sank 10.5% to $141.6m as sales in North Asia (-7.5% to $74m), South Asia (-10.4% to $60m), and other regions (-27.3% to $8m) continued to falter. Its latest uMagic massage chair failed to do its magic.

EBITDA margin collapsed 6.9ppt to 10.5%, hit by higher startup and operational costs at TWG Tea as well as legal fees of $4m relating to its twin court cases in Singapore and Hong Kong.

On a sequential quarterly basis, the lifestyle marketer closed 15 non-performing stores across Asia bringing its total same-brand stores in North Asia and South Asia to 355 (-9) and 150 (-6) respectively.

Two more TWG outlets were opened in Hong Kong, bringing its total outlets to 49 while six GNC outlets were shut during the quarter. Management intends to open another three TWG outlets before the year ends.

Management maintained its third interim DPS of 1¢, taking 9M15 dividend payout to 4¢, implying an indicative yield of 3.7%.

Maybank-KE opines that 3Q15’s poor results would likely be its worst for this year as it heads into its seasonal peak and as legal costs taper off in 4Q15. However, revenue will likely remain subdued owing to the gloomy economic outlook at its core markets.

At current price, OSIM is trading at 14.3x forward P/E and 2.7x P/B.

Latest broker ratings:
Credit Suisse downgrades to Uunderperform from Neutral, cuts TP to $1.35 from $1.50
UOBKH maintains Hold but cuts TP to $1.42 from $1.56
Maybank-KE maintains Hold but cuts TP to $1.49 from $1.75
OCBC maintains Hold but cuts TP to $1.49 from $1.52
Daiwa maintains Outperform with TP of $1.99