Don’t look back in anger. We are upgrading our TP to a Street high, as we complete a successful US NDR. We are now even more optimistic about the take-up of new massage chair launches in 2013. Looking back, we think 2013 will turn out to be a milestone year for two reasons. 1) We believe this will be the first time in OSIM’s history where they will launch major hits in two different ranges of massage chair and 2) OSIM will garner new customers from an untapped segment.

uAngel appears to be a major hit. Historically, the majority of OSIM’s massage chair sales have been derived from its flagship higher-end chair (currently uDivine). The uAngel was launched in 1Q2013. Based on our channel checks and anecdotal evidence, we believe this new lower-end model has been extremely well-received, especially from new buyers, due to its attractive price point and well-functioned massage despite a smaller size profile.

Andy Lau on a “Super Bowl slot”. Importantly, we believe the success of uAngel will only have minimal cannibalization effect on its flagship range, as the new chair to be launched mid-2013 will get a major facelift and functional enhancements. With ever-increasing marketing budget as a result of higher revenue, OSIM will be taking up TV ads on a popular program, the China equivalent of Super Bowl advertising slots, reaching out to more than 200 million viewers.

Building blocks for international business. With an improving product which has now surpassed Japanese peers technologically, management now believes OSIM may have potential for worldwide appeal. As a result, they have started thinking about strategies of expanding internationally. On a longer-term basis, this may become another exciting source of growth.

Reiterate BUY. We are upgrading our revenue and profit estimates for FY13F by 5% and 7% respectively. 2013 will be a milestone year both for potential profit growth as well as a foundation for future growth. Our higher TP of SGD2.60 is also a Street-high, with an upside of 38%. It remains pegged to 18x FY13F (translates to 20X upon exercise of convertible bonds), which is in-line with comparable peers in the region.

Source: Maybank Kim Eng Research - 20 Mar 2013