Excerpts from analysts' reports

Standard Chartered says OSIM is its ASEAN Emerging Companies top pick

Analyst: Stephen Hui

 OSIM has raised its stake in TWG Tea to 53.7% for an additional SGD 9mn (USD 7.2mn) on 16 October 2013.
 We believe TWG’s potential is significant. OSIM’s 53.7% stake in TWG and 60% stake in the North Asia JV may be worth a combined SGD 204mn, or 13% of its market cap.
 We believe the market is overlooking the growth prospects of TWG, which, in the past six years, has become one of Asia’s leading luxury-tea brands.
 We reiterate OSIM as our ASEAN Emerging Companies top pick. We have an Outperform rating on the stock with a price target of SGD 2.83.

TWG-teabagsTWG has 20 stores across 9 countries, and its tea is served in leading hotels, such as Mandarin Oriental Hotel Group, and airlines, such as Singapore Airlines (first and business classes). Photo: TWG

Upside from TWG. We like OSIM for its strong brand (Asia‟s leading massage chair brand), strong profitability (high ROCE and strong cash flow) and attractive valuations (15.1x 2014E PER and 3.0% yield).

We have not yet explicitly factored in TWG‟s earnings into our earnings forecasts for OSIM, but we believe that TWG may add an additional 5% to our 2014E earnings forecasts.

As a result, we believe risks to our earnings forecasts lie to the upside. After adding the discounted value of OSIM‟s stake in TWG, we raise our price target to SGD 2.83, implying 33% upside. 

250_1lim-hock-cheeSheng Siong CEO Lim Hock Chee. NextInsight file photoOSK-DMG keeps 'buy' rating on Shen Siong with 74-c target

Analyst: Tan Han Meng, CFA

Maintain BUY, with lower SGD0.74 TP. The stock offers dividend yields of above 4% on an average 14% earnings growth over the next two years.

Despite having distributed some SGD41m dividends so far this year, SSG’s net cash remains high at SGD108m, leaving room for possible special dividends to be dished out.

We lift our risk-free rate assumption to 3.0% from 2.5%.

This lowers our TP to SGD0.74, which implies a 24x FY14F P/E with a projected dividend yield of 3.9%. 


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