Osim

Osim: StanChart remains optimistic on these key points: 1) Leading massage chair brand with estimated 50% market share in HK, SG, TW, allowing OSIM to advertise products effectively 2) Leading profitability and strong cash flow, where, StanChart expects ROCE of 37% or OSIM in 2014, among the highest in StanChart’s coverage universe. FCF is strong and the stock trades at 7% FCF yield 3) Growth via new brands: StanChart feels that Osim’s other brands such as TWG’s potential is underestimated by the market. TWG is estimated to contribute substantially to OSIM’s results in 3-5 years. Osim’s increased stake In TWG from 45% to 54% announced yesterday seems to corroborate this key point. OSIM is currently trading 14.1x 2014E P/E with 3.2% yield, which is low for a leading brand with strong growth prospects and robust profitability. It also has net cash of $104m at end 2Q13. StanChart maintains outperform with TP: $2.65