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Published November 6, 2007
Will Christmas bring cheer to OSIM?
By CHOW PENN NEE
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BOTH men at the helm of OSIM International have raised their stakes in the healthy-lifestyle gadget company. Last Friday, founder and chief executive Ron Sim bought two million OSIM shares on the open market at about 61 cents, raising his direct and deemed stake from 52.71 per cent to about 53.08 per cent. This follows on from September, when Mr Sim had boosted his holding in the company by 500,000 shares or a stake of 0.09 per cent.
And last week, its executive director and chief financial officer (CFO) Peter Lee Hwai Kiat increased his direct shareholding in the company from 72,000 shares to 280,000, raising his interest from 0.013 per cent to 0.052 per cent. This is the first time he has bought stakes in the company since his appointment to the board two years ago.
By raising their stakes even after the company announced a Q307 net loss of $6.6 million late last month, was OSIM's top management signalling their confidence in the company and indicating that OSIM, which had seen its earnings hit a rough patch over the past few quarters, was finally turning the corner?
To be sure, the company best known for its massage chairs has not been in the best of health ever since the acquisition of US-based Brookstone about two years ago. OSIM, which was raking in big profits before the acquisition, saw net profit for Q106 fell 94 per cent to just $0.5 million, due to financing costs and lower revenue from Brookstone. Then in Q306, OSIM sank into the red, chalking up a net loss of $9.8 million against a profit of $10.4 million a year ago.
In July this year, it also had to grapple with losses resulting from copycat products of its best-selling uZap body trimmer and negative publicity arising from these imitators' unsubstantiated performance claims. In Q3 this year, sales from North Asia showed a decline of 6 per cent from the year before.
The spectre of a US recession has now cast even more uncertainty over the performance of retailer Brookstone, as US consumers may become less inclined to spend on gifts and other products.
But Mr Sim has been optimistic about the company's prospects and has tried to shrug off concerns bugging the company. Although he had conceded at the most recent results briefing that imitators were part and parcel of operating in emerging markets, he said the way to counteract this was to 'register patents and designs, and also move ahead of the competition by launching more products faster'. So the company is banking on success from the launch of a slew of new products and getting high-profile endorsement from the likes of Taiwanese model-actress Lin Chi Ling.
The question is whether the market shares his optimism. Share purchases by top management will not necessarily sway opinions. One gets the feeling that the current quarter would be the litmus test. For OSIM, Q4 is certainly a critical period, as Brookstone's profits are primarily made during the Christmas period, although the group is trying to make the US store profitable all year round. There are also emerging signs that OSIM's earnings could be on the upturn.
Net losses at the group level have been narrowed, with overall net loss of $6.6 million in Q307 decidedly smaller than the $9.8 million loss a year earlier. And even though it turned in a loss, the company's earnings before interest, tax, depreciation and amortisation actually rose 22 per cent to $15.8 million, and net profit excluding associates and joint ventures jumped 67 per cent to $8.2 million. But investors still need to be convinced that there is truly light at the end of what has been a relatively long tunnel, and that it is not a false dawn.
OSIM has to deliver in Q4. After two years of little concrete results from the acquisition of Brookstone, the market has grown increasingly impatient. If Q4 disappoints, then all of management's optimism would count for little.
Dear Hulumas,
this time i agreed with u
spend on money on this chair....i might as well paid ppl to massage me.... more shoik then a chair....
can have different ppl ...different style ...different location some more
not that i dont support our local product.....
I think this counter is really losing its appeal among investors.....used to part one of the most viewed and talked about stock in this forum but now no one seemed interested despite their 3Q07 earnings report yesterday.... 