OSIM drops dividend as Q1 earnings fall 42%

Singapore

LIFESTYLE products group OSIM International, the target of a privatisation bid by its founder Ron Sim, has dropped its usual first-quarter interim dividend after a dismal set of earnings.

This came as weaker sales in its core markets and cost pressures took a toll on margins, while dimming prospects of the stock possibly being worth more than Mr Sim's S$1.39 offer price anytime soon.

Net profit for the three months ended March 31 plummeted 42 per cent from the previous year to S$7.84 million, the group said in a Singapore Exchange filing on Tuesday after the market closed.

That worked out to earnings per share of 1.06 Singapore cents for Q1, down from 1.75 Singapore cents the previous year.

OSIM declared no interim dividend in the quarter, a drop from the one-cent interim dividend in the year-ago period. Before this, the group had declared Q1 interim dividends at least since 2011.

The weaker earnings came on the back of a 7.7 per cent drop in revenue to S$138.3 million year-on-year, which the group said was mainly due to an "overall weaker environment".

"Markets remain soft and the challenge will be to maintain margins amid rising fixed cost pressure. Due to prolonged soft market conditions, we will also adopt a cautious approach to invest for growth and continue to rationalise unprofitable stores," it said in its statement.

CIMB analyst Kenneth Ng said OSIM's Q1 performance could be summed up in one word: "Poor". The earnings also suggest that "the only thing holding up the share price is the offer", he added, referring to Mr Sim's privatisation bid.

Mr Sim recently raised his offer price to S$1.41 including a two-cent dividend, or S$1.39 ex-dividend. This was after an apparent mistake made in the takeover process, in which Credit Suisse scooped up nearly 17 million shares in the open market on Mr Sim's behalf on April 5 at prices above the then-offer price of S$1.37.

But Mr Sim has since said he will offer a "goodwill" payment to investors who sold their OSIM shares on April 5 at below the revised final ex-dividend offer price of S$1.39.

The group's net asset value per share was 51 Singapore cents as at March 31 this year, unchanged from as at Dec 31 last year. OSIM fell half a cent to close at S$1.39 on Tuesday before its results were released.