OSIM net cash flow of $61mil from operating activities

DMG - TP of S$1.55

OSIM reported a 1% YoY rise in 3Q11 earnings to S$13.1m. Earnings were dragged lower by a one-off S$3.5m tax provision, which otherwise would have grown by 28% YoY to S$16.6m, in-line with expectations. Revenue however is still below expectations coming in at only 66% of our FY11 forecast as YTD number of OSIM outlets has actually declined by 26 from 608 in Dec10 to 582 in Sep11, as management aggressively closed non-performing outlets.

We tweak our revenue estimates lower by 3%/4% for FY11/12F respectively in view of net negative store growth for FY11 and slower store growth for FY12. We also lower our opex assumptions in view of better cost management which results in a marginal +1%/-1% change in our FY11/12F earnings respectively.

In view of the entire retail industry that has de-rated, we lower our target multiple from 18x to 16x accordingly resulting in a new lower TP of S$1.55, providing a 30% upside from last closing. We continue to like the stock for its strong stable of brands and clean balance sheet. Maintain BUY.



AM Fraser

OSIM – Reported $13.1m profit for 3Q

OSIM 3Q net profit rose marginally to $13.1mil from $13mil a year ago. EPS were 1.74 cents, down from 1.94 cents a year ago. OSIM said it has shown positive growth in sales and profitability for 11 consecutive quarters due to a better product mix and higher productivity which resulted in higher profit margins. Revenue for the first nine months this year has grown 9.3% to $411mil compared to the same period last year, with a net cash flow of $61mil from operating activities.