Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD
Market Pulse: Golden Agri & OSIM (15 Sep 2011)
FOCUS
Golden Agri-Resources Ltd: Potentially more positive surprises
Summary: Golden Agri-Resources (GAR), which recently put out another strong set of results in 2Q11, could continue to post positive earnings surprises in 3Q11, buoyed by still-resilient crude palm oil (CPO) prices, the fairly inelastic demand for CPO, and an expected rise in CPO production in 2H11. As we had just adjusted our numbers (including our base CPO assumption) after its robust 2Q11 results in mid-Aug, we do not see the need to do so at this juncture. Applying the same 12.5x peg to our blended FY11/FY12F EPS, our fair value remains at S$0.80. Maintain BUY. Key risks to our estimates include a sharp weakening of the USD, a collapse of crude oil prices, and of course, severe drop in CPO demand from both China and India. (Carey Wong)
OSIM International: Resilient retail sales; but macro outlook still gloomy
Summary: OSIM International's (OSIM) recent decision to withdraw its proposed TDR listing should not be viewed as a cause for concern, in our opinion. This is due to its still-healthy financial and strong operating cashflow generating capabilities. We believe that management would focus on organic growth in the immediate term, although acquisitions would also remain as a key strategic driver for OSIM. While China's retail sales of consumer goods showcased strong resilience in Aug, we note that inflationary pressures remain persistently high despite easing slightly from 6.5% in Jul to 6.2% in Aug. We are trimming our sales and net profit estimates for FY11 slightly by 1.9% and 0.7% respectively (2.8% and 0.6% for FY12) as a conservative measure. Meanwhile, current anaemic macroeconomic conditions are also likely to have an unfavourable impact for high-beta stocks such as OSIM. Coupled with the possible belt-tightening by consumers ahead, we lower our valuation multiple for OSIM from 20x to 15x blended FY11/FY12F EPS, in line with its 1-year average forward PER. Our revised fair value estimate of S$1.52 (previously S$2.04) still translates into an upside potential of 33.3%. Reiterate BUY. (Wong Teck Ching Andy)
For more information on the above, visit www.ocbcresearch.comfor detailed report.
NEWS HEADLINES
- EU finance ministers have been warned confidentially of the danger of a renewed credit crunch as the euro zone sovereign debt crisis spills over to banks, according to documents obtained by Reuters.
- SGX announced new changes to listing rules, many of which are aimed at boosting corporate governance standards relating to foreign listings.
- EZRA Holdings has canned its proposed issue of perpetual bonds, citing market uncertainty amid alarming newsflows from Europe's deepening financial crisis.
- Manchester United is planning to raise up to two-thirds of its US$1b IPO in Singapore through non-voting preference shares, the Financial Times reported yesterday.
- Indonesian financial services group Malacca Trust yesterday posted a net profit of IDR10.8b (S$1.5m) for 2Q11, up 27.6% YoY.
- The Ministry of National Development (MND) said that the revised income ceiling of S$12k to purchase executive condominiums (EC) will now apply across the board regardless of the project's launch date.
- According to Credo Real Estate's analysis of URA Realis caveats for 1H11, private home sales by developers have held up while the secondary market has turned noticeably sluggish amid the global economic gloom.
Company Name: OSIM INTERNATIONAL LTD
| Research House: OCBC | Price Call: BUY | Target Price: 1.52 |
Market Pulse: Golden Agri & OSIM (15 Sep 2011)
FOCUS
Golden Agri-Resources Ltd: Potentially more positive surprises
Summary: Golden Agri-Resources (GAR), which recently put out another strong set of results in 2Q11, could continue to post positive earnings surprises in 3Q11, buoyed by still-resilient crude palm oil (CPO) prices, the fairly inelastic demand for CPO, and an expected rise in CPO production in 2H11. As we had just adjusted our numbers (including our base CPO assumption) after its robust 2Q11 results in mid-Aug, we do not see the need to do so at this juncture. Applying the same 12.5x peg to our blended FY11/FY12F EPS, our fair value remains at S$0.80. Maintain BUY. Key risks to our estimates include a sharp weakening of the USD, a collapse of crude oil prices, and of course, severe drop in CPO demand from both China and India. (Carey Wong)
OSIM International: Resilient retail sales; but macro outlook still gloomy
Summary: OSIM International's (OSIM) recent decision to withdraw its proposed TDR listing should not be viewed as a cause for concern, in our opinion. This is due to its still-healthy financial and strong operating cashflow generating capabilities. We believe that management would focus on organic growth in the immediate term, although acquisitions would also remain as a key strategic driver for OSIM. While China's retail sales of consumer goods showcased strong resilience in Aug, we note that inflationary pressures remain persistently high despite easing slightly from 6.5% in Jul to 6.2% in Aug. We are trimming our sales and net profit estimates for FY11 slightly by 1.9% and 0.7% respectively (2.8% and 0.6% for FY12) as a conservative measure. Meanwhile, current anaemic macroeconomic conditions are also likely to have an unfavourable impact for high-beta stocks such as OSIM. Coupled with the possible belt-tightening by consumers ahead, we lower our valuation multiple for OSIM from 20x to 15x blended FY11/FY12F EPS, in line with its 1-year average forward PER. Our revised fair value estimate of S$1.52 (previously S$2.04) still translates into an upside potential of 33.3%. Reiterate BUY. (Wong Teck Ching Andy)
For more information on the above, visit www.ocbcresearch.comfor detailed report.
NEWS HEADLINES
- EU finance ministers have been warned confidentially of the danger of a renewed credit crunch as the euro zone sovereign debt crisis spills over to banks, according to documents obtained by Reuters.
- SGX announced new changes to listing rules, many of which are aimed at boosting corporate governance standards relating to foreign listings.
- EZRA Holdings has canned its proposed issue of perpetual bonds, citing market uncertainty amid alarming newsflows from Europe's deepening financial crisis.
- Manchester United is planning to raise up to two-thirds of its US$1b IPO in Singapore through non-voting preference shares, the Financial Times reported yesterday.
- Indonesian financial services group Malacca Trust yesterday posted a net profit of IDR10.8b (S$1.5m) for 2Q11, up 27.6% YoY.
- The Ministry of National Development (MND) said that the revised income ceiling of S$12k to purchase executive condominiums (EC) will now apply across the board regardless of the project's launch date.
- According to Credo Real Estate's analysis of URA Realis caveats for 1H11, private home sales by developers have held up while the secondary market has turned noticeably sluggish amid the global economic gloom.
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