OSIM International Ltd (OSIM) released its 1Q16 results yesterday evening. 1Q16 revenue was down 7.7% YoY to S$138.3m, which met 22- 23% of consensus and our full year estimate. However PATMI fell 42% to S$7.8m, forming only 13-15% of consensus and our full year estimate.

As performance in their core markets remain soft, management cited adopting a cautious approach towards investing and opening new stores. They will also continue to rationalize unprofitable stores. We believe the core business segment is facing growth challenges and can no longer thrive as easily as in the past.

As before, while TWG Tea offers room for growth in the longer term, the group is still seeing startup and operational cost pressures from this segment. Understandably, OSIM has also dropped its interim dividend vs. the 1 S-cent/share last year. We reiterate our recommendation to accept the offer.

Source: OCBC Research - 20 Apr 2016