19 May 2014

OSIM - 2014Q1 Result - May 2014

Below is the summary of OSIM result extracted from the news released by the co:

Record Profit in 2014

We have achieved growth in profitability for 21 consecutive quarters.

Q1 sales were $173 million +15%. The increase in sales was driven by higher consumer demand for OSIM products like uInfinity, uDivine App, uDiva, uPhoria Warm, uHug, uPixie, uCozy, uRelax, uPebble, uSlender, uShape, nutritional supplements like Taut, Stem C, Zhi , Triflex, Liver Protector and luxury tea like Sakura Tea and Follow Me Tea. TWG Tea became a subsidiary in October 2013 and has also contributed to the sales.

Revenue by Region
South Asia's increased sales were mainly due to the maiden consolidation of TWG Tea's sales after it became a subsidiary in October 2013.

Q1 profit before tax reached a high of $37 million +17%. The better performance was due mainly to an increase in sales and better productivity. The increase in operating expenses was mainly due to increases in wages and rental but our better productivity in sales per outlet resulted in better profits.

We are pleased that the core business of OSIM continued to grow during the year. Our nutritional supplements subsidiary ONI Global also grew profits. Q1 profit after tax was a record $29 million +15%.

Global Network of Outlets
The company targeted to have 45 TWG Tea outlets by end of FY14.

My Notes

Annualized EPS is around 15.24 cents and estimated annualized PE is around 18.5X. Net cash generated from operating activities was S$20M and investing cash flow is less than S$2M. It means that Osim is currently a cash cow that generates free cash flow and it provides opportunities for the company to return more cash back to shareholders or use it for further expansion.

The company declared 1 cent dividend payable on 24 July 2014. Based on past year records, Osim may declare full year dividend of at least 6 cents dividend to shareholders, which is translated to 2.1% dividend yield based on current market price.

There is a huge amount of intangible assets in the balance sheet, hence net tangible asset per shares is around 24.7 cents compared to 46 cents of NAV. The P/NTA ratio would be around 11X.

As the company is expanding further on TWG tea business with growth in other division, it is not hard to guess that the group could easily achieve another record year this year. This company is good to invest for those investors who prefer a company that can generate free cash flow and moderate growth in revenue & profits.

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