Within expectations - growth + dividend indeed. FY12 results were within expectations, with net profit coming in at SGD86.9m vs our forecast of SGD85.3m. The company announced a final interim dividend of SGD2 cent/ share (including a special interim of SGD1 cent/ share). This takes full-year dividends to SGD6 cents/ share, which is double last year’s amount. This is a strong showing which validates our earlier investment thesis that OSIM is a rare growth + dividend stock.

South-Asia showed strong growth. Profit growth of 26% was driven by revenue growth of 9% for the year. For FY12, South-Asia was a key growth driver, up 12% yoy despite no significant increase in store count. North Asia grew 5% yoy. We understand from management that Hong Kong and Taiwan had better growth compared to China in 2012, which is unsurprising given the generally weak consumer sales data points for the latter. For FY13, management targets a 30-40 net store count increase in China, vs just 7 for the whole of 2012.

Margin expansion continues. Profit margins continue to improve on all counts, including gross, EBITDA and net. We believe this is mainly driven by economies of scale as well as higher productivity per store. Management is confident of mitigating any staff cost pressures by increasing the sales productivity per head.

Launch of uAngel. This is a contractible massage chair, which is a replacement for the earlier uSoffa-runway. The price in Singapore will be SGD1990, which is a lower price-point. It is already launched in Hong Kong and China, and will be launched in Singapore in March. We believe the space efficiency as well as the price point will capture a new customer base. Despite the lower price-point, margins are likely to be maintained due to more efficient cost production.

Maintain BUY. We keep our estimates mostly unchanged, but introduce FY15 numbers. Our TP of SGD2.45 remains pegged to 18x FY13F, which is higher than historical but in-line with comparable peers in the region. Maintain BUY, with a 12-month upside of 40% including dividends. Key catalyst will include stronger than expected sales from launch of new chairs in 2013.

Source: Maybank Kim Eng Research - 01 Feb 2013