Free polls from Pollhost.com
Should we set a cap on bankers' salaries to prevent future crisis?
Yes! Get the bastards! No! They deserve every penny!   

Tuesday, November 14, 2006

Osim @ 1.77 ( Health products / Singapore ) 40 comments



Final Poll Results: 9:3

(P.S: Sorry for any disturbances the advertisements above may have caused you)

Main issues

1. Brookstone operations showing evidence of decline

2. Core operations showing evidence of deterioration


Given that two out of the three quarters of FY06 had not exactly been satisfactory for the high standards priced into Osim's valuation, it is surprising that the market has not punished it more severely. It is now back at 1.77, about 50% higher than its year-starting market cap (after adjusting for its mid-year 1:5 split) and just 15% off its peak. Yet things are not exactly rosy, looking at the trends indicated in the financials.

First-off, the big acquisition of 2005, Brookstone. It is clear now that its equity-accounted results are having a big impact, albeit of the negative flavour, on Osim's quarterly financials. Below is a listing of the quarterly results for Brookstone alone starting from 1Q05:

Period: 3Q06, 2Q06, 1Q06, 4Q05, 3Q05, 2Q05, 1Q05
Net profit/loss (US$M): -10.3, -11.0, -11.3, +17.0, -14.5, -5.7, -6.8

Considering that in FY04, Brookstone’s sales rose 15% over the previous year to US$500 million while earning a net profit of US$21 million, it has severely underperformed in FY05 and FY06 so far, looking at the quarterly trends. Summing up the quarters, Brookstone incurred ~US$10M losses in FY05 and looks like incurring another big loss in FY06; stagnant sales growth year-on-year exhibited so far in FY06 suggests there is unlikely to be any miracle in 4Q06 (although it will be a profit). Frankly, it looks like the Osim consortium bought a dud --- as a number of Singapore companies making major acquisitions overseas have experienced (eg. Yeo Hiap Seng), in an attempt to secure an instant North American sales and distribution network. There is no free lunch in the world, and much work would have to be done to get a declining company back on track. Even worse, Osim has tacked heavy debts onto itself to finance the acquisition, from a cash-rich position before the acquisition to a high gearing of debt-equity about equal to parity now.

So far up to 2Q06, the counterweight to Brookstone's poor performance had been Osim's core massage chair business, which had hitherto been having impressive growth rates. A popular figure used to check the popularity of retail outlets is the use of same-store sales, since sales growth could be due to new outlets rather than any growth in product or brand popularity; growth due to new outlet growth is less desirable because they add to fixed overhead burden. In 3Q06 my estimates for this figure have exhibited a sharp decline in both the North Asia and South Asia markets: in North Asia, number of outlets are 17% more than in 3Q05, while sales growth in this region has declined 5%; in South Asia, number of outlets are 24% more than in 3Q05, while sales growth in this region has only been 17%. It is a dramatic decline from the previous quarters where sales had grown 30-60% year-on-year despite low store unit growth. And to add to it, profit margins have declined, leading to a drop in profit even before associate (Brookstone) impact. The more cynical can claim that Brookstone losses were used to disguise the extent of the core business deterioration, when in fact Brookstone losses in 3Q06 had actually been less than that in 3Q05 (-US$14M).

It may not be advisable, of course, to cut things too fine by analysing results quarter by quarter if we consider company strategy and budgeting (eg. marketing) tends to be drawn out over an entire year; however, Osim themselves have identified the systematic reason: the North Asia market, especially in China, is plagued by imitations that have eroded revenue and margins. Could this trend continue?

The buyer of Osim now will be betting on two things: firstly, that Brookstone eventually works out fine in the fourth quarter and that Osim can piggy-back on its sales network in the US to expand sales in the North-American market; and secondly, that Osim's brand equity is something worth buying into despite all the teething acquisition problems. Would one be willing to place this bet? I wouldn't, for a stock trading at 20X FY05 PE looking at a reduced FY06 net profit. It is true that it has had a strong track record, yet the 3Q06 results exhibiting a slowdown in core operations gives ample evidence to suggest reconsideration. Ron Sim purchased more stock after the 3Q06 results to show his confidence; of course he would, since he started the company and holds >50% of its stock on whose share price his wealth depends.

Poll(please vote)
I agree that Osim is a hot-stock-not: Yes/No

 

 

40 Comments:

Anonymous Anonymous said...

Considering osim is one of the success stories over the past few years before the acquisition of brookstone, it will take some time for the market to realise that it is no longer the growth company it used to be.

11/17/2006 10:06 PM  
Anonymous Anonymous said...

M&A is always a high risk game. for Osim, the acquisition is costly and a high risk bet at this moment. hope it can integrate well. for short to mid term, i will avoid.

~hermes

11/18/2006 9:28 AM  
Blogger DanielXX said...

The next quarter will be crucial, for several reasons:
1.4Q ie. the results will be for full year
2.Consecutive quarters of underperformance could lead to exodus; fund managers can be tolerant of an underperforming quarter but get nervous thereafter
3.Brookstone has been saying its 4Q results define the entire year's profits. So how profitable will it be?

Wait with bated breath.

11/18/2006 4:49 PM  
Blogger sharetipsinfo said...

Market view for coming days.

Hi Everyone
Indian stock market is playing the trick. One day its
Down and other day its up. Those days were gone when our stock market
was dependent on other now others depend on us.
Our Economy is zooming up. GDP , GDR going up at good rate.
This is the time for stock Trading / investing , Make as much
money as you can.
We assure youSENSEX will touch 14000 Mark by the end of this year.
There will be minor corrections at regular intervals , however they are good for investors as gaps are filled.
Nothing to worry just jump in and take maximum advantage
Regards

sharetipsinfo

11/24/2006 12:53 PM  
Anonymous Anonymous said...

followup to danielxx, the 4Q results went south and osim share price followed quickly. i think it's another case of lots of hot air and very little substance. i will definitely avoid.

2/03/2007 1:05 AM  
Anonymous Anonymous said...

Brookstone store through Couponalbum.com offers lots of discounted coupons, deals and coupon codes related to home & garden.......!!

11/05/2007 7:44 PM  
Blogger 游侠 said...

M&A is part of Osim strategy globalization. As to risk management view the company already diversified its portfolio by investing in Asia and America. I can see the bright future of this company though.

5/09/2008 11:15 PM  
Blogger Friends Always Enjoy with Me said...

Welcome to Friend Always Enjoy n Masti Live Blog.
Friend Always Enjoy n Masti is here to provide all the friends the good news including of the good and the bad times shared together & Jokes to enjoy & Release some pressure from mind when tense. So that all the stress made on our shoulders is a little bit halka-phulka and all in all Enjoy the LIFE is coming. Nevertheless Always Remember Live Happy Be Happy To Receive daily Jokes & News on your Mobile by sms. For More Details Friends Always Enjoy n Masti
http://www.friendsalwaysenjoynmasti.blogspot.com

7/15/2008 8:33 PM  
Anonymous shareinfoline.com said...

ShareInfoline.com is the leading website in India providing recommendations on Indian Shares, Stocks & Commodities.

It Provides all its calls by way of SMS and gives more than 80% accurcay in results.

You can also check the Past Performance in our website www.shareinfoline.com

8/01/2008 1:26 PM  
Anonymous shareinfoline said...

www.shareinfoline.com provides you with the best Indian stock market tips..that too for very less amount and with maximum sureity ...

Their tips are really doing wonders in the world..At this point of time they are the most trustworthy players ...

Do mind my words and just check www.shareinfoline.com

9/17/2008 6:28 PM  
Blogger www.PunterCalls.Com - GET Stock Market Sure Calls Directly From Punter Groups, India said...

A gap-up opening is likely Thursday mirroring Asian markets as investors www puntercalls com were cheered by signs of a turnaround in key economies including
upbeat earnings of US corporates.

US stocks posted strong gains on Wednesday, www puntercalls com sparked by results from bellwether Intel Corp that lifted hopes for a rebound in technology spending and improved corporate profitability.
Read more detail
http://puntercalls.com/news/asian-markets-as-investors-were-cheered.html

7/16/2009 5:25 PM  
Blogger blog said...

Hi i m visit your blog it's a really nice blog and casino informatie please visit my blogs and send me comment.
Bingo City UK, UK Bingo Space, Play Bingo Online, 88 Bingo, bingo king uk and more blogs here related to bingo information.

Thanks

2/08/2010 5:45 PM  
Anonymous StocksDuniya said...

StocksDuniya.com, are in BSE & NSE (Bombay Stock Exchange & National Stock Market), with Index of Sensex & Nifty.

For Traders, Best Picks and Tips for the Market with Quality Calls in F & O, Intraday & Delivery.

StocksDuniya, provide with very few scripts but all are technical tips and Researched.

We lend a hand our member with whatever they want like Technical Analysis or Technical Analysis Software, Data, Fundamental Analysis Software, Time to Time Books, CDs, eBooks - PDF, option trading and future, nifty tips, stock tips, equity trading tips, option tips etc.


StocksDuniya.com is The Greatest?

Don’t Judge.

Join and Decide with Experience…!

Super-Profit…!!!
Indian Stock Market

Regards,
Stocks Duniya

5/23/2010 6:00 PM  
Anonymous sharetipsinfo said...

NSE and BSE have many listed stocks, Let Sharetipsinfo research best profitable stocks for you. Our accuracy speaks for us

11/23/2010 5:04 PM  
Anonymous Stock Tips said...

It was a awe-inspiring post and it has a significant meaning and thanks for sharing the information.Would love to read your next post too......
Thanks
Regards
Stock Tips

3/26/2011 7:45 PM  
Anonymous Commodity Tips said...

Thanks so much for this! I haven't been this moved by a blog for a long time! You’ve got it, whatever that means in blogging. Anyway, You are definitely someone that has something to say that people need to hear. Keep up the good work. Keep on inspiring the people!
regards:
Commodity Tips

6/20/2011 5:55 PM  
Anonymous Commodity tips said...

Very good post, I was really searching for this topic, as I wanted this topic to understand completely and it is also very rare in internet, that is why it was very difficult to understand.

Thank you for sharing this.

regards:

Commodity tips

6/30/2011 11:03 PM  
Anonymous Raja said...

Many real estate developers have decired the move terming in a bad and illtimed one and are wary if the sector will witness a downward trend in the coming days.
Nifty

7/28/2011 1:28 PM  
Anonymous Anonymous said...

The most artistic record man ever im so glad my father had a chance to learn under such a great master.Thanks for sharing the informative post.
--------------------------
My site: Instant Poker Bonus

11/09/2011 4:38 PM  
Anonymous sharegyan001 said...

If you are trading in NSE, BSE, MCX and in NCDEX then let sharegyan give you all stock trading gyan

12/22/2011 2:42 PM  
Anonymous sharegyan001 said...

If you are trading in NSE, BSE, MCX and in NCDEX then let sharegyan give you all stock trading gyan

1/11/2012 8:01 PM  
Anonymous sharegyan001 said...

If you are trading in NSE, BSE, MCX and in NCDEX then let sharegyan give you all stock trading gyan

1/12/2012 3:49 PM  
Anonymous sharegyan001 said...

If you are trading in NSE, BSE, MCX and in NCDEX then let sharegyan give you all stock trading gyan

1/12/2012 5:39 PM  
Anonymous way2profit said...

Get Indian stock market tips covering cash tips, future tips, nifty trading idea, commodity and option trading tips

1/17/2012 2:55 PM  
Anonymous sharegyan001 said...

If you are trading in NSE, BSE, MCX and in NCDEX then let sharegyan give you all stock trading gyan

1/31/2012 4:41 PM  
Blogger vishal said...

Thanks so much for this! I haven't been this moved by a blog for a long time! You’ve got it, whatever that means in blogging. Anyway, You are definitely someone that has something to say that people need to hear. Keep up the good work. Keep on inspiring the people!

stock tips,nifty tips,commodity tips

3/01/2012 6:55 PM  
Anonymous sharegyan001 said...

If you are trading in NSE, BSE, MCX and

in NCDEX then let sharegyan give you all stock trading

gyan

3/02/2012 2:30 PM  
Blogger sharetipsinfo said...

What kind Of Averaging Is Done For Calculation Of An Index? Why Are Indexes Important?



If you are interested in investing your money in the stock market, then it is very important that you have all the concepts of the stock market clear so that you have all the knowledge of the functioning of the stock market. You should also try to know what kind of averaging is done for calculation of an index? Why are indexes important? So let us have a look at these concepts so that you can get a good picture of the stock market as a whole.

Researching And Studying

When it comes to making a decision in investing in the stock market, then you should always make a good research of the market so that you do not have to be sorry after losing your money in the Indian stock market. It is your hard earned money and it is your own responsibility that you take a good investment decision. You should make your decisions very clear whether you wish to go for short-term or long-term investment. If you do not have enough time to research the stock market, then you can do so by going to a website that speaks of stock market. You can have a good idea about the functioning of the stock market. But you need to be very careful when you go for different websites because there are certain websites that gives you wrong advice. In order to trade online, you need to have a trading account. So there are some websites that takes into account your credit card. This is very dangerous thing that you need to avoid. You should never let anyone know your credit card details because there are some that can mislead you. You never know when you would get bankrupt. So you need to avoid these situations.

4/03/2012 1:05 PM  
Blogger Paul said...

thanks for this post. This post makes a great point about focusing your efforts.

stock tips,equity tips,stock market india | Currency Tips,Forex trading Tips,Forex Pairs | commodity tips

6/06/2012 7:14 PM  
Blogger Stock market trading said...

Now find all top Indian stock market analyst with their stock market
recommendations at one place

7/21/2012 5:35 PM  
Anonymous Stock Tips said...

This blog Is very informative,I am really pleased to post my comment on this blog.Stock Tips is dedicated towards unfurling the expertise of those Stock veterans in the Indian Stock Market domain who are involved in providing Stock tips.

9/12/2012 12:43 PM  
Anonymous Mcx Tips said...

This is one of the good articles you can find in the net explaining everything in detail regarding the topic. I thank you for taking your time sharing your thoughts and ideas to a lot of readers out there. Nice post thanks from Mcx Tips

9/24/2012 8:15 PM  
Blogger DEWHURST TOULSON said...

Even worse, Osim has tacked heavy debts onto itself to finance the acquisition,
dissertation

11/08/2012 6:18 PM  
Blogger sharetipsinfo said...

This comment has been removed by the author.

2/27/2013 3:04 PM  
Blogger ORANGECOMMODITIES said...

Really nice information.keep blogging. commodity Tips

5/24/2013 6:53 PM  
Blogger Share tips said...

We are surprised to read information that has been written on this blog

9/07/2013 5:22 PM  
Anonymous misheeta said...

gr8 info ... keep it up

very nice post ... keep it up

http://www.fi-advisor.com/free-newsletter.html

3/13/2014 5:18 PM  
Blogger aditi said...

Good market research helps in predicting stock market in a better manner also helps to frame accurate stock tips which are most likely to earn you good profit.

6/13/2016 8:20 PM  
Blogger aditi said...

Very impressive market updates can be depicted from this post. If an investor is aware of updates of market and uses experts stock tips so that good profit can be earned using it.

6/14/2016 9:09 PM  
Blogger Kritika Singh said...

I found it quiet interesting ,Thank you for posting the great content…I was looking for something like this…, hopefully you will keep posting such blogs…


MCX Normal Calls

12/27/2016 8:06 PM  

Post a Comment

<< Home