OSIM

OSIM: Strong results with better than expected profit. 2Q rev at $138.6m +6.0% yoy -6.9% qoq and net profit at $18.8m +55.3% yoy -6.8% qoq. Strong profit growth attributed to higher profit margins from better product mix and higher productivity possibly due to co moving production of high-end chairs from Japan to China. EBITDA margins appear stable at approx 20% lvls from prev yr 15% lvls.

The increase in rev yoy was due to launch of new products. Growth in sales came from South Asia improving 23.3% yoy forming 38% of rev, co is in a net cash position of $59m excluding $120m bond issue in July North Asia remained flat but still contributed a 57% share of the rev. Co has incorporated OSIM-TWG (North Asia) and intends to build a tea salon and launch the brand in HK within the yr. TDR approval has been extended by 3 mths to 28 Oct so some update on status should be expected by end Oct.

Co has declared a 2nd interim div for the period with EPS of 2.57c. At 1H11 EPS of 5.55c annualized P/E is approx 14.0x. Macq maintains Outperform with TP$2.06 on higher expected earnings but overhang of possible acquisitions given cash position.