Excerpts from analysts' report
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» Taking up an 8.4% strategic stake in Trek 2000 International (Trek 2000) (TREK SP, UNDER REVIEW). OSIM International’s (OSIM) investment cost is SGD10.9m, representing an estimated 7x FY16F P/E and 6.4x EV/ EBITDA. It ought to add earnings of around SGD1.2m next year. This stake acquisition is not expected to have a material impact on the company’s profitability initially, but could grow going forward. OSIM has no board seats, but expects to add value to Trek 2000 by providing input into commercial aspects of the latter’s technology.
» Possibilities abound. Flucard is a proven technology, which represents a cost-efficient way of adding wireless features into devices. This can be used in consumer electronics as well as medical and wearable technology. We believe there are exciting possibilities to incorporate Flucard into OSIM’s existing and new wellness and massage products. Examples include the ability to monitor and upload medical statistics wirelessly to doctors.
» War chest barely dented. Separately, OSIM also acquired a 21% stake in Hong Kong-incorporated Laboratoires du Palais Royal Ltd for USD2m. We understand this is a cosmetic product start-up, which is preparing for product launches. As of 1Q15, OSIM has a net cash position of SGD292m and is in a position to increase its stake further. We think the company could remain on the lookout for more acquisition opportunities to expand its suite of brands and products.
» Maintain NEUTRAL. We maintain our NEUTRAL call and SGD2.00 TP, pegged to 15x FY15F ex-cash P/E, given its poor earnings visibility at the moment. We believe SGD1.60 remains an excellent entry-price, which is based on 12x FY15F ex-cash P/E, its historical trough valuation.
Full report here.
