Brokers' Take

OSIM International

July 27 close: $1.66
CITIGROUP RESEARCH, July 26

WE HAVE raised our FY06, FY07 and FY08E estimates significantly by 27 per cent, 30 per cent and 30 per cent, respectively; our forecasts are now between 32 and 46 per cent above the street. Our target price has also been boosted by 48 per cent from $1.67 to $2.48 (including rollover from December 2006 to June 2007), and we upgrade OSIM from 'sell' to 'buy'.

Positives all over: 2Q06 operating results (ex-Brookstone) surprised on the upside again; gross margins surged from 59.4 per cent in 2Q05 to 66.5 per cent in 2Q06; 2Q06 operating profits up 128 per cent year-on-year to $31 million; bank borrowings down from Dec 05 on strong cashflows; and interim dividends up 180 per cent to $0.013 (equal to full-year FY05).

Brookstone starting to improve: The improvement at Brookstone following the appointment of Lou Mancini as the new CEO has positively surprised us. The management has instilled a stronger sales culture and implemented new commission-based incentive schemes that will reward on a monthly basis if targets are met (versus previously at Christmas only).

Rest of OSIM strong: The group's core OSIM products are doing well globally with revenues up 36 per cent year-on-year in North Asia, up 45 per cent in South Asia, and up 16 per cent for the rest of the world. New products that the group has planned seem very interesting.
BUY

- Compiled by MATTHEW PHAN