-->

OSIM International - RHB Invest 2016-03-07: Something For Shareholders To Consider

OSIM International - RHB Invest 2016-03-07: Something For Shareholders To Consider OSIM INTERNATIONAL LTD O23.SI 

OSIM International - Something For Shareholders To Consider 

  • We believe major shareholder Mr Ron Sim’s offer of SGD1.32/share to minority shareholders represents a reasonable price. This is in light of the weak equity market conditions and poor sales outlook in OSIM’s key markets over the next 12 months. 
  • However, longer-term shareholders may probably not be keen to sell, as the fundamental intrinsic value of the company is likely to be higher than the offer price. 
  • Offer price of SGD1.32/share can be easily funded. OSIM International (OSIM) has gross cash/fixed deposits of SGD358m and net cash of SGD211m. This can be used to partially fund the SGD315m required to buy out the remaining 30% minority shareholders at the current offer price. 
  • The company generates strong cash flow and working capital needs are only around SGD50m. 


Offer price reflects weak underlying market conditions. 

  • Based on our estimates, it implies FY16F P/E of 16.7x and EV/EBITDA of 8.5x. We feel this is reasonable in the current weak equity market conditions and poor sales outlook in OSIM’s key markets. 
  • We note that the offer price is a 33.5% premium to the volume-weighted trading value (VWAP) in the three months prior to the offer. 

Longer-term intrinsic value is higher in our view. 

  • Sales and profitability are on a weak trend currently in OSIM’s key markets. This is due to poor consumer sentiment. However, we believe the company’s strong branding and market leadership position remains intact and profit growth is likely to eventually return. 
  • Furthermore, OSIM’s current profitability does not include TWG, which is still making losses in North Asia. 
  • For a theoretical break-up value, we believe shares could be worth between SGD1.28-1.65/share. 
  • Using a very conservative DCF-based approach, whereby earnings plateau in FY22F at around FY14 levels (SGD102m) and 0% terminal growth, we derive a price of SGD1.30/share. 

Something for shareholders to consider. 

  • We believe in the current market conditions, shareholders would have to consider the opportunity of realising their investments immediately for a significant premium over the counter’s recent trading prices; however, longer-term shareholders may not be keen to sell out. 
  • As stock trading has been halted, we place our recommendation and TP under review, pending further developments.



James Koh RHB Invest | http://www.rhbinvest.com.sg/ 2016-03-07
RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 99999 Same 1.50


Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......