1Q13 results preview. OSIM is announcing its 1Q13 results on 7 May after market close. We believe this will be a milestone year for the company in terms of earnings momentum and the first quarter results will be closely watched. Our TP of SGD2.60 remains a Street high, reflecting our bullishness for 2013. OSIM is our top pick within the Singapore consumer sector and we reiterate BUY.

Double-digit sales growth. We are expecting net profit of around SGD25.5m for 1Q13 (up 15% yoy), on double-digit sales growth, which will be a first in many years. This is a slightly slower momentum than our full-year expectation of 21% yoy profit growth and 17% yoy sales growth, because we expect the benefit of new product launches to accelerate as the year progresses.

Seasonality to be smoothened by product launches this year. Historically, 1st quarter is seasonally strong, along with the 4th quarter, we believe mainly due to festive effects (Chinese New Year and Christmas). This year, we are expecting less seasonality due to the timing of product launches (uAngel in the 1st quarter and a new flagship chair in the middle of the year). These products will boost demand in the weaker 2nd and 3rd quarters and level out the qoq volatility.

uAngel effects. The uAngel was first launched in Hong Kong and Malaysia at the beginning of the year, and subsequently launched in the rest of the markets in end Feb/ early March. This product has proven very popular according to our channel checks, and will likely boost YoY sales growth. The full effect will be apparent from 2nd quarter onward. Given its lower price point (SGD1990), we would also be keen to observe whether there are any signs of gross margin erosion.

Reiterate BUY. We keep our earnings forecast intact, which are 5-8% above consensus estimates. 2013 will be a milestone year both for potential profit growth as well as a foundation for future growth. Our TP of SGD2.60 is also a Street high, with an upside of 31%. 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 - 30 Apr 2013