Brokers' take

OSIM International | Hold

Feb 4 close: S$2.02

Target price: S$1.97

OCBC Investment Research, Feb 4

AFTER a widely disappointing quarter, there were no surprises for OSIM's overall FY14 results. Q4 FY14 revenue and Profit after tax and minority interests were slightly lower by about one per cent year on year to S$177.7 million and S$27.4 million respectively. This was largely within the street's expectations... While it currently holds a significant cash balance of S$427.6 million, no further insight was given on the potential utilisation ... Management continues to keep their positive outlook on China, citing confidence in the launch of new products from OSIM as well as a resilient affluent consumer market despite closing 32 non-performing OSIM outlets over the year. TWG Tea remains as a fast growing business. TWG Tea opened six new stores in Q4, bringing its total outlets to 43 as at end-2014. Management reiterated its target of opening 15-20 new TWG Tea stores mainly in Asia for 2015. We keep the target peg of 14 times to our FY15 forecast earnings per share, while our fair value estimate on OSIM increases from S$1.90 to S$1.97.

SIA Engineering Company | Sell

Feb 4 close: S$4.17

Target price: S$3.62

Phillip Securities Research (Singapore), Feb 4

REVENUE dipped 6.5 per cent year on year to S$265.3 million, with associates and joint ventures (JVs) plunging 33.2 per cent year on year to S$25.3 million due to reduction in engine shop visits. Profit after tax and minority interests was consequently dragged down 23.5 per cent year on year to S$46.3 million... Improved reliability of engines have dragged down associates and JVs contribution for three consecutive quarters since Q1 FY15. Expect to see at least one more quarter of steep percentage year-on-year drop before normalisation... Business model for SIA Engineering Company could possibly experience periodic hiccups, as each successive engine model's reliability continues to improve. We lower our terminal growth rate marginally to 1.5 per cent (from 2 per cent), on account of the long-term trend of improving engine reliability, resulting in less frequent engine shop visits; while remaining cognisant that fleet expansion would play a mitigating role. Maintain "reduce" rating on SIA Engineering Company, with lower target price of S$3.62, from the previous S$3.95.

Compiled by Chan Yi Wen

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