Eu Yan Sang

Eu Yan Sang: OSKDMG and CIMB turning positive on stock with CIMB initiating Coverage with Buy call and OSKDMG adding the stock to its small-mid cap portfolio. - CIMB initiates Coverage with O/p Call and $0.89 TP. Note that leading TCM player EYS should be able to leverage on its strong brand name and grow the franchise in its Australian and Chinese segments. A turnaround is already taking place in Australia. The recent JV in Chengdu should ensure the steady supply of quality herbs. Think that the group is well positioned to combat rising rental and raw material costs. Phase 1 capacity expansion plans are due to be completed in 2016 and this will more than double its existing capacity. The Sichuan Neautus JV will also improve margins through lower raw material costs and sales of quality herbs at a later stage. In light of this, house nitiate coverage with an Outperform and target price of $0.89, based on 16.3x CY14 P/E (0.5 s.d. above its 5-year historical mean). A turnaround of its Australian and Chinese business segments is a potential re-rating catalyst - DMG small-mid cal specialists Terrence Wong says that he will be buying Eu Yan Sang, in DMG’s model portfolio, citing that Eu Yan Sang troubled Aussie subsidiary HealthLife, while still loss-making, Eu Yan Sang is on the mend and is expected to break even by FY15. In terms of valuation, its forward P/E of 16x is very reasonable compared to HK- listed Beijing Tong Ren Tang (8138 HK), which is going for 35x earnings. House small-mid cap portfolio has done reasonably well, with a 14.5% return ytd vs STI of -0.7%. Other holdings in house portfolio includes, Ezion, Osim, Neratel, Nam Cheong, Cambridge, and Lian Beng.