Osim
is synonymous with its massage chairs. Besides the massage chair business, it holds other retail brands as well such as GNC and TWG Tea. Interestingly, the major market and revenue
contributor to Osim is North Asia, to be exact China.
Signs of trouble in China?
While the Chinese Government has
painted a moderately strong outlook on China, Osim’s result is showing
otherwise. 9M current FY results has reported an overall decline of 12% revenue
and a 44.4% fall in profits. This shows how cyclical Osim’s products are and
the exposure it has to the China market. While its share prices have fallen to S$1.36,
the question now is: Is Osim an undervalued buy with its growth story seemingly
over.
With the slowing Chinese market, Osim
has reported the third consecutive double digit decline in sales. While the
company is still generating positive cash flow with a strong balance sheet, I
still think Osim is rather too high a price. At an estimated EPS of 6 cents
(and same amount in forecasted cash flow generation); $1.36 signals that the company is
selling at about 22x PE. With its neutral growth story, I do find a PE/P/FCF of 22x as high.
Furthermore, I am not sanguine on
Osim’s strategic investment in Trek 2000. There are many better companies out
there for strategic investment and diversification.
Outlook
In its commentary, Osim has signaled it is positive in sustaining its no1 position in the Chinese market. While I
believe that is true, being no1 in a slowing market is not a positive as well.
It remains to be seen how will Osim turn around its fortunes, especially when
it has an upcoming convertible bond to redeem.
No comments:
Post a Comment