Satisfying 2Q
2Q14 net profit of SGD29.5m (+13% YoY, +2% QoQ) met expectations. Management said revenue (+10% YoY, +6% QoQ) could have been 5-10% stronger if not for the World Cup. China was the best performer and was behind North Asia’s revenue outperformance. TWG was profitable but contributions were minimal as it is in expansion mode. Net cash hit SGD271m upon full conversion of the 2011 convertible bonds. The regular 2 SGD cts interim dividend was declared.
Stronger 2H14 expected
Our FY14E forecast is 6% above consensus. 1H14 profit forms 47% of our full year number. Drivers should be:
1) China, with its strong momentum boosted by the uDiva sofa chair which was just launched in China in June;
2) GNC Taiwan’s steady improvements after its return to profitability;
3) new products in 2H14; and
4) stronger TWG contributions.
More new products OSIM will be launching four new massage products in 2H14. These include uBuddy, an office chair with massage functions priced below SGD1,300 and uSqueez Air, a pneumatic leg massager. Early next year, a new mid-range massage chair may be rolled out. OSIM’s strategy is now clear. From just one chair model, it is building up a range of products for different segments: uDiva, an economy chair for younger consumers, and uBuddy for office workers. This strategy should sustain its growth.
Target Price: SGD3.50
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