Osim International

table of contents 1. entryway to Osim International4 2. Competitive Strategy4 3. go with nurse chain4 3. 1 introduction5 3. 2 trading ope symmetryns Management5 4. Non- financial analysis5 4. 1Corporate Social Responsibility5 4. 2Consumer Sen mnts6 4. 3Corporate finish6 4. 4Customer Retention and Growth6 5. Global breaklook7 6. sedulousness outlook of sinewy lifestyle reapings7 7. similitude among Osim and its competitors8 8. Osim Financials8 8. 1 ships companys Financial symmetrys8 8. 2Market Prospects9 8. 2. 1Osim on its avouch9 8. 2. 2Osim vs. Selected peers (VGO, trounce World, Ogawa, Jacks)9 8. 2. 3Osim vs. STI10 8. 3 intercommunicate execution of instrument10 9. purpose11 attachment A12App eradicateix B16 Appendix C19 Appendix D24 Appendix E25 Appendix F26 ? 1. Introduction to Osim International Osim International Ltd. (Osim) is a detonating device of capital of Singapore listed political party a globose loss leader in the healthy lifestyle products dilig ence. It has been take since its inception by CEO Ron Sim, the companys repute driver, instrumental in bringing Osim to where it is today, greatly influencing its vision, mission and set with his personal touch. The company has expanded to more than 1,100 stores in more than 30 countries terra firmawide. indoors the next 3 to 5 courses, they excogitate to open over 50 outlets and come along expand their subsidiaries, GNC and RichLife. . Competitive Strategy In view of the current economic situation, Osim seeks to cautiously and optimistically focus on build juicyness, positive EBITDA and operating cash flux . Even though they fuck off exceeded gross gross gross sales expectations so far this year, this may be challenging given that they operate in a niche mart ripe affected by consumer sentiment and other spherical events. Osim feels a upstanding chemical equilibrium sheet is integral to meeting this aim, doable through with(predicate) and through and thro ugh enhanced ope proportionalitynal faculty and outlets being leaner and more efficacious in sales. With Brand Osim, they desire an frame that is adept with (the) healthy lifestyle .This demonstrates their ambitiousness to non only be the securities persistence leader, but to too be the shuffle with the best think of and association. Furthermore, Osim adopts a two-pronged feeler of innovation and growth creating demand through innovation and development to support the evaluate US market recovery and the Chinese markets expansion. There is excessively focus on their most important resource, employees training and empowering talents with wildness on corporate destination alignment. 3. Company value chain Osims value chain involves two primary(prenominal) processes Innovation and Operations Management. . 1Innovation Research and development (R&D) is a process given much fury as Osim strives to release upstart and applicable products to create demand and to keep a technological edge above its competition, resulting in products such as the iDesire and iMedic amongst others. This has won consumers and its efforts were rewarded in 2008, voted as Asias most best-loved set for massage passs . This is also inculcated in their brand image with their desire to take on intelligent innovation . 3. 2Operations Management Operations management complicates Osims manufacturing and retail ramp ups.Upon subjecting peeled material to their respective manufacturing processes, Osim creates a product that it believes will add value for consumers and invite them to pay a premium to dominate their desired quality of life. Its retail arm works with an bellicose marketing segment to promote their products. Whilst costs argon high, the sensed product value added is proportionately high. 4. Non-financial analysis 4. 1Corporate Social Responsibility Osim aims to encourage a positive attitude towards healthy lifestyles. Osim Triathlons in various Asiatic countries , and the Osim Singapore stay the hang be some sporting events it has sponsored. eyepatch Osim promotes itself as a lifestyle brand, for example, through the promotion of the uSqueez leg massager which appeals to triathletes, they surrender also donated to the Childrens Cancer Foundation and back up an endowment fund with the NUS Business school day . Osim has also demonstrated accountability to family by recalling its products twice . The urgency to recall defective products has exposen Osims commitment to civic responsibility. However, the recall affected Osims report card as nodes were put through the dither of claiming damages.Despite this, Osims branding keeps strong and is still one of the worlds most reliable contributers in its industry. Accountability to investors was also demonstrated when they came in runners-up in the Most Transpargonnt Company Award (Commerce) in SIAS Investors Choice Award. 4. 2Consumer Sentiments In a 2008 survey by Synovate , Osim win the No. 1 hale life style Products Brand in consumers minds across Asia. The findings memorialize Osims strong Asian customer base and affirms its effective branding as a leading al unkeptr of modern products with design and quality, performance, and safety standards.Furthermore, massage chair sales in China has retained good growth with easy-to-buy payment schemes. 4. 3Corporate Culture A strong corporate culture inculcating positive thinking has been used as a tool to survive market movements. This tool is behind the entrance of new-sprung(prenominal) innovations and the extension of Osims r for each one into the global market. Besides this, substantial donationholdings by attain management gibes management goals are flop aligned with that of appropriateholders . 4. 4Customer Retention and Growth In 2005, Osim was rated by Nielsen Consumers as the number one brand in seven attributes .Osim is also a member of Superbrands . To date, higher(prenominal) end pr oducts are made in Japan, a country recognized for its quality and preciseness . Mid-tier to lower end products are fabricate in China to reduce costs. Although make in China, Osim ensures reliability and quality of these products. The market share gained from the provision of quality products has been shown in the same Synovate survey as mentioned above. Osim has also invested heavily in marketing, often publish its advertisements in various media to increase its brand presence.These include centrespreads in major newspapers as well as television commercials, reign in celebrities such as S. H. E and Fiona Xie. This fortifies their brands credibility, with the aim of converting new customers and retaining current ones. In a way, they have already created a strong and batten customer base and exclusive help can be placed on gaining additional market share at heart the parting and globally. 5. Global outlook Since the global recession, the market has rebounded with the STI cu rrently trading rough 2,600 points, a level last seen a year ago .We are currently believed to be in the accumulation pattern , with economic growth expected in the coming years. Global markets have alter while key export markets such as the US and Europe die hard fairly weak . A quick recovery is in line for Asian economies, but stay freshd soft underground demand means that fiscal and fiscal measures must be sustained to ensure continued growth. 6. Industry outlook of healthy lifestyle products Osims argumentation efforts are concentrated on an progressively bird feeder Asia , oddly in countries wish well Singapore and China, where at that place is great focus on lifestyle and well-being.Health is a greater concern as busier schedules reduce practice session time. As Asias aging existence finds new ship canal to improve their alive standards, more may turn to increasingly relevant healthcare products. However, the lifestyle industry is most vulnerable to fluctuat ions in business cycles. With the downturn, spending is either decreased or cheaper alternatives are sought. 7. Comparison between Osim and its competitors Osims main competitors in the health-food industry provide competition to its subsidiary, Global Active Limited.Its main recognized competitors in the massage products markets include OGAWA, OTO Bodycare and Panasonic. Osim thus relies heavily on innovation, war-ridden marketing and quality to distinguish its products from its competitors, leverage on the fact that consumer preferences are slowly influenced. A nonher form of competition comes in the form of imitations and inexpensive Chinese products that individually devalue Osims brand and provide viable substitutes. This forces Osim to differentiate itself as a premium product and introduce a secondary brand, NOVO, to woo consumers with its affordability.With the expected incoming growth in the healthy lifestyle products industry and Osims stronghold on its base consumer m arkets, we expect Osim to continue outperforming its competitors, especially in its core business function. 8. Osim Financials 8. 1Companys Financial Ratios Osims profitability ratios have been weakening over the last 5 years, with sharp declines from 2006 onwards. lucre margins dropped from the healthy region of 9% to 0. 6% in 2007 and at long last into the negative in 2008. Other communicates ratios like ROA and ROE have also dropped importantly from 2005 onwards.Osims sales fell from a high of S$623million in 2006 to S$457million in 2008. The low profitability ratios adumbrate that the company is not in effect utilizing its assets and shareholder investments to generate sales and profit, which is a engender for concern for dominance investors. Its dwindling sales and profitability can be attributed to maddened competition from imitations, as mentioned above. Also, Osim spent S$149million to acquire 55% of Brookstone Inc. in 2005, which did not work out well, as Brookstones losses dragged down Osims profitability from 2006 onwards.Osims liquidity ratios, despite the unforesightful financial performances in the quondam(prenominal) hardly a(prenominal) years, have remained relatively stable. Current ratio has stayed systematically above 1, bar 2007, which implies that the chemical group is able to meet its short verge liabilities with its short enclosure assets. Interest coverage has been come uponing sharply, primarily delinquent to the fall in operating profit. In coiffure to continue its repayment of interest charges, profits have to improve. 8. 2Market Prospects 8. 2. 1Osim on its own Generally, share tolls have been on a strong downward trend since 2006, with MACD crossing at a lower place zero for most of the period.Osims share price plunged 98% from a high of S$2. 06 in 2006 to a low of S$0. 05 in the start of 2009 earlier viewing signs of recovery, rising from below S$0. 10 to the fresh stability of nigh S$0. 45, an increase of more than four hundred% during the period from March to September 2009. The upstart bullish trend has also been reflected in the strong divergence of the MACD over zero. 8. 2. 2Osim vs. Selected peers (VGO, Best World, Ogawa, Jacks) During the last 5 years, Osim fared bruskly compared to its industry peers.It was the worst performing contain out of the 5 selected companies over the period from 1Q07 to 1Q09. However, charge our attention on more recent developments, Osims share price has been outdoing that of its competitors significantly, due to its strong recovery since 1Q09. Osims stock has risen at a higher rate, and been the best performing in foothold of absolute value. Another interesting chemical element is the recent significant increase in insider trading, with fourth-year management aggressively get the company stock and subscribing to excess shares through the companys rights issue .in concert with the hints of recovery from recent financial figures, the procur e of shares by Osims management and assertionfulness shown in the company might unspoiled be the confirmatory signal of their reversal in fortunes. 8. 2. 3Osim vs. STI On a 5-year basis, analyze the performance of Osims share price against the STI, we observe that generally, it has been underperforming relative to the STI. The period between mid-2005 and early 2007, which coincided with Osims best financial performance, saw the company outperforming the market.Since 1Q07, it has been underperforming by a large margin until the recent overlord performance relative to the STI starting from April 2009. 8. 3Projected Performance Judging from the 9 month 2009 figures, sales appear to continue sluggishly and we see the total sales for 2009 to be subordinate to that of 2008. However, EBITDA has increased by 16% as compared to the same period last year. Having full written down the investment in Brookstone, future losses need not be accounted for, and Osims profit onwards tax is ex pected to improve to near S$33million for 2009, a marked utility from 2007 and 2008.Projected profitability ratios also imply signs of recovery with ROA and ROE estimated to be just about 9. 02% and 21. 36% respectively. liquidness ratios for the Group remain healthy as well, as at 30 Sept 2009. Post restructuring, Osim has emerged leaner, significantly cutting down expenses over the past 2 years. Hence, if sales pick up in the future, we should see a give of the high profit margins realized in the past. Osims current Net summation Value (NAV) per share is S$0. 14. Compared against the just share price of around S$0. 45 over the past 2 months, the Price-to-book ratio is about 3. times, implying that the stock may be overvalued. However, the general price-to-book ratio for an median(a) company is 7 times , showing that Osims share price may still rise in the future. 9. Conclusion With Ron Sim at the helm and the alignment of the senior management with company objectives, Osi m stands poised to discover its goals in the short term with its aggressive marketing and focus on a strong balance sheet during this time of economic uncertainty. They have earned the trust of consumers through the provision of quality products and good corporate governance. term they have effectively lowered costs, revenue remains sluggish. They excogitation to improve this through expansion in emerging markets as well as to take advantage of Brookstones strategic positioning in American markets. Whilst having derived ways to compete effectively, and with the industry expected to grow, common soldier consumption will still be depressed amidst this period of economic recovery due to a lag effect. be a medium to long term as between two to flipper years, we thus projected that Osim, on its own will continue to be profitable as a going concern.While we recognise that outside the industry, there are many superior alternatives that have the potential to generate far better returns , which is beyond the scope of this report, we recommend that with regards to an investment just in Osim or in the Healthy Lifestyle Products industry, Osim is clearly the worthwhile woof to invest in. Appendix A positivity Ratios 20082007200620052004 lettuce Margin (%)-21. 780. 65. 429. 299. 2 ROA (%)-46. 580. 868. 0510. 214. 6 ROE (%)-141. 921. 9619. 8728. 9726. 16 Cash fly the coop/Operating Revenue (%)-17. 984. 957. 8911. 812. 6 Profit Margin (%)-21. 780. 65. 429. 299. Profitability ratios measure the return earned on a companys capital and the financial cushion relative to each dollar of sales. Osims low profitability ratios in recent years are a cause for concern. However, much can be attributed to the economic crisis and the write-off of Brookstone in 2008. Liquidity Ratios 20082007200620052004 Current Ratio1. 090. 951. 021. 111. 87 Quick Ratio0. 480. 450. 450. 671. 38 Interest Coverage-19. 052. 067. 751750. 95 Current Ratio1. 090. 951. 021. 111. 87 Generally, despite th e poor performance affix in 2007 and 2008, Osims Liquidity Ratios remained relatively stable.This implies that there are no issues regarding the solvency of the company and resources are available to meet its obligations. 20082007200620052004 P/E Ratio (%)n. a. 103. 6422. 415. 2912. 48 Dividend Payout Ratio (%)0219. 4332. 2315. 3415. 39 P/E ratio is an indicator of perceived value of a stock. Osims unusually high P/E ratio in 2007 is due to the low EPS resulting from the poor performance posted in that year. Osim has been consistently paying out dividends until 2008. Hence, should performance improves in future, investors should expect to receive dividend payouts. Appendix B Projected Performance -Month Key FinancialsEstimated Figures for 2009 Sales335. 9450 EBITDA33. 845 Profit before Tax24. 533 Net profit16. 121 Full year figures for 2009 determined based on pro-rating 9-month figures to get conservative estimates. (in $millions)9mth 20099mth 2008% change2009 Estimated200820072 00620052004 Sales335. 9346. 2-2. 98%450456. 7523. 7622. 9502. 5332. 2 EBITDA33. 829. 116%453935. 476. 754. 545. 4 Profit before Tax24. 5-19. 5225. 64%33-92. 25. 443. 651. 435. 3 Net profit16. 1-26161. 92%21-99. 53. 735. 845. 630. 8 (in $millions)9mth 20099mth 2008% change2009 Estimated20082007200620052004 Sales335. 9346. 2-2. 98%450456. 7523. 7622. 502. 5332. 2 EBITDA33. 829. 116%453935. 476. 754. 545. 4 Estimated Financial Ratios for 2009 (With dimension Sheet as at 30 Sept 2009) Profit Margin (%)4. 67 ROA (%)9. 02 ROE (%)21. 36 Current Ratio at B/S date1. 16 2009 figures suggest Osim is on the road to recovery. Projected Profit before Tax show improvement compared to 2008 and 2007, though not to the terminus of 2006s high. Compared to 1st half of 2008, 2009 has shown improvement in EBITDA even though sales continue to be weak. .Charts with Projected 2009 Ratios Appendix C Osim Stock Charts 5-Year 1-Year Comparison against STI 5-Year 1-Year Comparison Competitors 5-Year 1-Year -Y ear infinite 1-Year Absolute Appendix D Insider Trades announcement DateBuyerNumber of Shares (000) 23/2/09Ron Sim2002 13/3/093466 17/3/09953 27/3/0996150 31/3/09200 1/4/09200 6/4/092700 9/4/096500 Subtotal112171 23/2/09Peter Lee320 13/3/09950 31/3/09550 9/10/09270 Subtotal2090 23/2/09Richard Leow300 23/2/09Ong Kian Min1618 24/2/091000 2/4/09752 23/2/09Michael Kan300 2/4/09218 23/2/09Charlie Teo300 27/3/09365 6/4/09100 2/4/09Khor Peng Soon16 Subtotal4969 Total119230 Appendix E ? Appendix F Japans quality in manufacturing was taken from Fundamentals of Composites Manufacturing Materials, Methods, and Applications by A. brant Strong