uInfinity soft-launched in Hong Kong. We had a firsthand look at the eagerly awaited new chair, which has just been soft-launched in Hong Kong. This chair will replace the existing uDivine, which has been the flagship for the past three years. Initial selling price was HKD46,800, almost 35% above the existing uDivine App. Singapore’s selling price would likely be in the SGD6,000+ range. This will likely be softlaunched in Singapore and China over the next few weeks.

Getting closer to the human hand. Upon testing, what struck us immediately was the much better massage mechanism, even compared to uDivine which was considered a revolutionary technology. The leg portion has also been given a significant upgrade, feeling similar to the popular leg massager uPhoria. The chair feels much more snuck, owing to the slightly smaller profile, though the sales assistant was quick to assure that even plus-sized customers can still fit comfortably!

No significant change in design. We were however, slightly underwhelmed by the similarity in design to its predecessor. Our view is that this could result in less power drawing in customers at the shops, and OSIM would have to run an effective marketing campaign to counteract this. We understand there are plans in place, which will come in during the official launch.

Previewing 2Q13 results. OSIM will announce after market close on the 30th July. For the quarter, we are expecting revenue and profit growth of 15% and 18% (SGD26.5m) respectively. Growth will likely be driven by sale of the uAngel, which will have a full quarterly effect and some spillover orders from 1Q13. Gross margins may see a marginal downtick due to the lower prices of uAngel, though we would expect this to be balanced against higher prices of the uInfinity.

Maintain BUY. We trim our earnings forecast by 2-3% on lower revenue estimates. Earnings upside could come from better than expected sales of the new flagship massage chair, which we estimate accounted for as much as 50% of sales historically. Our TP of SGD2.53 remains pegged to 18x FY13F (translates to 20X upon exercise of convertible bonds), implying 1x PEG. Maintain BUY.

Source: Maybank Kim Eng Research - 15 Jul 2013