OSIM stock dives; analyst points to possible earnings worries
Shares fall 9.8% over two days, prompting SGX query and a subsequent 'trade with caution' advice
Singapore
THE stock of lifestyle products group OSIM International, a long-time market darling, traded sharply lower on Wednesday for a second day in a row on heavy volume.
It closed at S$2.33, down 10 cents or 4.1 per cent, on 8.4 million shares traded. The 30-day average volume was just 1.9 million shares, according to Bloomberg.
OSIM took the opportunity to buy back 650,000 shares at an average price of S$2.326 - something it had not done for a year.
Kevin Foy, director of equity sales trading at brokerage Maybank Kim Eng, said that the sell-off might not be due to unusual reasons.
"What we're seeing around the region is a lot of small and medium caps getting crushed. We've seen this in the US, Europe, Malaysia," he said.
But an analyst, who did not want to be named, said that the real reason could be bets that the company will disappoint earnings expectations.
"They have guided well. Maybe their results could disappoint," the analyst said.
OSIM sells massage chairs, foot and neck massagers, nutritional supplements and luxury tea. It is due to report results on Oct 28 for its third quarter ended Sept 30.
Investors could be speculating on the underpeformance of their core massage chair business, the analyst said. "A lot of their sales are in China. But we haven't found any concrete reason whether China is really that bad. Maybe their results won't be as bad."
The Singapore Exchange (SGX) slapped a "trade with caution" advice on the stock on Wednesday afternoon following a query. It noted a 9.8 per cent decline in two days, with OSIM saying it was not aware of any reasons that could possibly explain the trading activity.
OSIM is a broker favourite. Out of 12 analysts covering the stock, there are nine "buys", one "hold" and two "sells", according to Bloomberg. Bloomberg data also indicates that analysts' average 12-month price target is S$3.35 a share, and that OSIM is currently trading at 15.8 times historical earnings. Its historical high was S$2.90 on April 30.
