OSIM: is the stock selloff over?

THE stock price fall was shockingly swift. And those still invested in lifestyle products group OSIM International must be wondering when the pain will end.

Amid the search for answers, some observers blame the dismal third-quarter net profit, which fell 28 per cent to S$16 million. This translated to Q3 earnings per share (EPS) of just 2.11 Singapore cents (Q3 2013: 3.14 cents), bringing nine-month EPS to 9.87 cents, below the 10.21 cents it earned a year earlier. The more bearish analysts are projecting full-year earnings of 13 cents or so, lower than last year.

At the current stock price of about S$1.80 and taking out net cash of 30 cents a share, the market is pricing in an earnings multiple of under 12 times - which is not rich. If investors think OSIM can maintain earnings at this level in perpetuity, with no growth at all in any of OSIM's massage products, supplements or tea businesses, then S$1.80 sounds like a fair price to pay.