Why is OSIM International Ltd Up 6% Today?

Shares of OSIM International Ltd  (SGX: O23) are up 6% today as of the time of writing (10:40 am) after it reported its fiscal fourth quarter earnings yesterday evening. The reporting period was for 1 October 2014 to 31 December 2014.

OSIM is a leading purveyor of well-being and healthy lifestyle products such as its namesake massage chairs and TWG Teas. You can read more about the company here.

Financial highlights

Here’s a rundown on the financial figures for OSIM’s latest earnings release:

  1. Overall revenue for the quarter came in at $177.7 million and was flat compared to a year ago. For the whole of 2014 (OSIM’s fiscal year coincides with the calendar year), revenue was $691 million — up 6.7% compared to 2013.
  2. Quarterly profit rose 2% to $27.7 million. For 2014, profit came in at $102.2 million, roughly flat compared to 2013.
  3. Despite flat profit levels, OSIM’s earnings per share (EPS) had declined. For the quarter, EPS fell 5.7% from 3.67 cents in the fourth quarter last year to 3.46 cents in the reporting quarter. The massage chair maker made 13.2 cents in EPS for 2014, down 2.8% from 2013.
  4. Cashflow from operations came in at $39.1 million for the fourth quarter of 2014 with capital expenditure clocking in at $7.5 million. This gives OSIM a positive free cash flow of $31.6 million. For the full year, free cash flow was a healthy $85.3 million.
  5. As of 31 December 2014, the company had $427.5 million in cash and equivalents and $185.4 million in debt and convertible bonds. This gives a healthy net cash position of $242 million. OSIM’s balance sheet has strengthened compared to a year ago as it had $267.3 million in cash and equivalents and $155 million in borrowings back then.

Judging by the 6% rise in share price we’re seeing with OSIM, it would appear that the company’s results were “less bad” than what investors were expecting. OSIM started 2014 well, but experienced slowdowns in revenue and profits over the last two quarters of the year.

The Foolish investor may be better served by keeping in mind the long term track record of performance by OSIM (for perspective, the company had logged “21 quarters of record profit” in the first quarter of 2014), and less about what happened in the last six months.

For the quarter, OSIM’s management also proposed a dividend of 2 cents per share. The total dividend for 2014 would be 6 cents per share, unchanged from the year before.

Operational highlights

Revenue from the different geographical segments for OSIM – North Asia, South Asia, and the rest – were flat across the board.

The company also opened 14 OSIM outlets while simultaneously closing 32 non-performing outlets of the same brand in China. The company ended its fiscal fourth quarter with 561 OSIM outlets (254 in China), 238 GNC/Richlife outlets and 43 TWG Tea outlets for a total outlet count of 842.

OSIM’s total outlet count was lower compared to the figure of 861 seen at the ed of 2013. It is notable that the company’s revenue is higher despite the reduction in the number of outlets.

For the fourth quarter of 2014, OSIM benefited from lower “Other operating expenses” in part due to easier comparables with the same quarter in 2013. The fourth quarter in 2013 had impairment and foreign translation costs.

OSIM’s management added a commentary on the reporting quarter’s results and some insight on its future:

“Our fundamentals remain positive as OSIM is the dominant brand in healthy lifestyle products in our 5 key countries. Despite a challenging year, we managed to attain 8% growth in operating EBITDA and 1% earnings growth. We are not resting, we are continuing to invest for future growth supported by a strong balance sheet.”

Foolish summary

At its closing price of $1.89 yesterday, OSIM’s traded at around 14.3 times trailing earnings with a trailing twelve months dividend yield of 3.1%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.