OSIM: Announced that is has acquired 35% stake in TWG Tea for $31.4m and has also formed a JV with TWG for North Asia in which OSIM has a 60% stake. Acquisition in line with the Co’s strategy of expanding its luxury brands portfolio and tap into the growing demand for such products in middle to upper income households especially in China…..
Given the lack of financial details of TWG, Macquarie believes acquisition is positive for Co. and should be value accretive. Add that given small size and nature of acquisition, investor concerns should subside. House reiterate O/P call on Co. with $2.06 TP. Note that Co has more than sufficient cash to meet expansion plans for 3 of its brands – OSIM, Richlife and TWG. At 12.5x FY12 P/E (ex-cash), stock is at large 50% discount to China consumer names.
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