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Hot stock: Osim at one-year low, views from analysts

Wednesday, October 29, 2014 - 14:31
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Lifestyle products group OSIM International, which sells massage chairs, nutritional supplements and luxury tea, is in the midst of a dramatic sell-down on Wednesday.

LIFESTYLE products group OSIM International, which sells massage chairs, nutritional supplements and luxury tea, is in the midst of a dramatic sell-down on Wednesday.

As of 2.20pm, shares are trading at S$1.915, down 33.5 cents or almost 15 per cent. It last traded at this level more than a year ago.

The sell-off comes after OSIM reported a 28 per cent drop in net profit to S$16.4 million for its third quarter ended Sept 30, 2014, ending a long-running streak of increasing profits.

The profit drop was due to a mix of legal costs and startup costs for TWG Tea and a weaker consumer spending environment in Asia - even as margins for its core massage chair business are holding up.

CIMB Research, which had a target price of S$4.05 just four days before the results came out on Tuesday, admitted the latest results were "a shocker".

It slashed its price target to S$2.37.

Analysts Kenneth Ng and Justin Chiam said: "We think profits will stay weak before it gets better. There will be a lower share price to buy into this company."

Over at brokerage DMG & Partners, analyst James Koh maintained his "Buy" call, with a reduced target price of S$2.75, down from S$3.85. "We are confident the business remains fundamentally sound, but are cognizant that the operating environment is weak," he said.

DBS analyst Alfie Yeo kept his "Buy" call with a lower target price of S$2.59, from S$3.26. "Post earnings revision, the stock now trades more attractively at 15 times 2015 forecast earnings, at below +1standard deviation of its mean. We believe current valuations have priced in negatives, given that valuations are below peer averages of 18 times (earnings)," he said.

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