Towards Financial Freedom
OSIM International Ltd - 3Q Results On Track
Results in'line. 9M FY12 sales and earnings met 73% and 77% of our full year estimates respectively, with YoY growth as 15% and 49%. North Asia'China, Hong Kong and Taiwan'continues to be the key revenue driver, contributing to 53% of sales in the quarter. Sales grew on a more diversi'ed mix of products, where we likely saw the strongest growth from smaller'quantum items like foot/head/neck and shoulder massagers.
Pursuing pro'tability through productivity. OSIM continues to focus on raising productivity'improving sales per store and per man to grow the bottomline. 3Q's net margin was 13.8%, up from 10.6% a year ago. We like the cost control strategy, particularly in a weak macro environment where consumer spending generally decreases. OSIM has remained cautious in adding stores in China in the quarter, which now stands at 274, hardly changed from 272 as at end 2011.
Interim dividend of 1c declared in 3Q. Including this payout, OSIM has declared a total of 4c for dividends so far. Based on full year DPS estimates of 5c, OSIM yields 3.4% based on last close.
Maintain BUY, FV unchanged at S$1.66. We continue to value OSIM based on 13.5x weight'blended FY12F and FY13F EPS of S$0.123. OSIM's share price has performed very well in the past 3 months, returning some 25%. Even though upside potential has narrowed, OSIM still warrants a BUY with ~15% potential return. BUY.
Key risks are competition (for e.g. an emerging brand visibility that we see in OTO), China's growth and liking towards OSIM's chair massagers, and the success of key product launches (particularly the uDivine App).
Source: AmFraser
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