Osim International Limited (O23)

Source: OSIM website

Happy CNY to all readers! It has taken me forever to post this as I've been busy and truth be told, I don't blog about all the stocks I research on a daily basis as I just can't afford the time. Time = $$$ and I need to make some $$$ everyday. It seems that most readers who drop by are interested in local stocks so I'm trying to do more of such posts.

ACCICB was looking at Osim International Limited (Osim) so I was curious and decided to take a look since TWG Tea is definitely what I would call a rising star under the BCG product matrix. Plus he told me that the price had plunged since the issuance of convertible bonds in September last year so I figured it was worth a look.

Osim's revenue stream come from 4 business units namely OSIM, GNC, RichLife and TWG Tea. I find these 4 brands compliment each other as they are all within the realm of the health and lifestyle industry. It is reminiscent of Reckitt Benckiser Group plc focus albeit at a smaller scale.

OSIM requires no introduction as its products such as massage chairs are always endorsed by mega stars such as Andy Lau, Sammi Cheng, Lee Min-ho etc. Personally, I've used their products before but still prefer a human massage therapist thus I'm an unlikely convert. I would think that OSIM still contributes to the bulk of the company's revenue through the strength of its brand and its business strategy of constantly launching new products really ensures that it is being kept in the consumer's top of the mind awareness.

Oni Global Pte Ltd (Oni) is the sole franchisee for GNC in Singapore, Malaysia, Taiwan and Australia. It also owns the RichLife franchise in China. Oni also distributes nutraceutical products such as supplements, vitamins, minerals, herbs and functional foods. I would think that this retail setup would come under fire as markets evolve and people turn to buying these items online, which is exactly how the U.S. market has become for the vitamin and supplements industry. Maybe this is where 1/3 of the money from the convertible bond issuance would be used for potential M&A acquisitions to strengthen this business segment.

Of all the divisions, I am most upbeat on it's TWG business segment which has been growing rapidly as seen by the opening of new outlets. However, Osim does not provide a revenue breakdown of it's business segments, instead it does a breakdown through geographic regions which is pretty much of little use to us since the company is concentrated in Asia. As I am unable to ascertain whether TWG is able to provide continuous and high growth, it makes me stop short of investing in it for the long term.

The other issue I had with Osim was that it has revenues in multiple currencies and at this point where I am suspecting a currency war, I am hesitant to invest in companies that are exposed to too many currencies. As we all know, it is tough to successfully hedge for multiple currencies regardless whether you are doing it individually or otherwise. I think it is made worst when your base currency is in SGD which is not as widely traded as USD, JPY, GBP etc. In addition, not 100% of a company's  FX exposure is being hedged most of the time which leads to the risk of losing part of their revenue gains should the market move against them.

Management wise, it is run by Ron Sim who also owns 62% of shares and succession plans are a question mark which is typical of many home grown companies listed and otherwise. This would not sit well with credit although there are ways to mitigate this risk. As a shareholder though, you tend to worry if you are indeed holding this counter for the long term which I hardly do nowadays with the market being as fluid as it is.

The current price of 1.98 is ok I guess although I told ACCICB that it would have been better to purchase it when the price was at 1.80! For those who had done that, a big Congrats to you!

Comments

  1. Hi Joyce,

    I was looking at Osim not too long ago, albeit preliminaryly

    My colleague pass me a TWG tea bag for tea once, and I must say it really taste fragrance and different!

    I do think its a possible growth engine the only bug I have is yield ...

    Nice post and happy new year to you!!

    ReplyDelete
    Replies
    1. Hi Sillyinvestor,

      Thanks for dropping by and Gong Xi Fa Cai to you too! I was also similarly introduced to TWG by ACCICB's colleague whom we call TWG girl because it seems she only dines there! I think TWG is at a good place right now and dividend yield is dismal which from observation is quite typical of owner managed listed companies on SGX. Thus I usually trade such companies if there's an opportunity ;)

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