OSIM International Ltd’s Latest Earnings: Stumbling Out the Gate

OSIM International Ltd  (SGX: O23) released its fiscal first-quarter earnings report yesterday evening. The reporting period was for 1 January 2016 to 31 March 2016.

As a quick introduction, OSIM retails well-being and healthy lifestyle products, such as its namesake massage chairs and luxury teas. You can read more about the company in here or catch up with the results from its previous quarter in here.

Financial highlights

The following’s a quick rundown on the latest financial figures for OSIM:

  1. OSIM’s revenue for the reporting quarter was down 8% year-on-year to $138 million.
  2. But, profit (after tax) for the period plunged by over 40% to end at $8 million.
  3. Consequently, OSIM’s earnings per share (EPS) was down almost 40% as well, moving from 1.8 cents in the first-quarter of 2015 to just 1.1 cents in the reporting quarter.
  4. Cash flow from operations in the first-quarter of 2016 came in at $11.3 million. With capital expenditure clocking in at $1.2 million, OSIM had positive free cash flow of $10.1 million, a decline from the $15.4 million recorded last year ($18.9 million in cash flow from operations and $3.5 million in capex).
  5. As of 31 March 2016, the company had $353 million in cash and equivalents and $187.7 million in debt and convertible bonds. This gives OSIM a healthy net cash position of $172.1 million. At the same date last year, OSIM had cash and equivalents of $445.6 million and $169.4 million in debt and convertible bonds.

OSIM is caught in a bit of a hullabaloo at the moment. Last month, OSIM’s chairman and major shareholder, Ron Sim, announced that he wanted to take the company private. But, the initial offer to privatise the company was not well-received by its other shareholders. Then, Sim revised the offer, only to have to revise the revised-offer within a short period of time. At the moment, the privatisation attempt on OSIM is on-going.

But as the saying goes, the show must go on.

In all, OSIM started 2016 on the backfoot after raking in lower revenue and profit. That said, the company’s free cash flow remained in positive territory and the balance sheet is still solid with a net cash position.

OSIM’s board proposed not to pay a dividend for the reporting quarter. In the same quarter last year, OSIM had paid a dividend of S$0.01 per share. The actual cash dividends that were distributed during the reporting quarter was $7.4 million, which is lower than the quarter’s free cash flow of $10.1 million.

Operational highlights and a future outlook

The soft market conditions OSIM had experienced in 2015 seems to have spilled over to 2016. Revenue from the North Asia and South Asia regions had fallen by 2.5% and 8% year-on-year respectively.

OSIM ended the reporting quarter with 516 OSIM outlets, 194 GNC/Richlife outlets and 52 TWG Tea outlets. The total outlet count was 762. In the first-quarter of 2015, OSIM had 837 outlets under its umbrella.

On the outlook ahead, OSIM’s management will be adopting a cautious stance for the year:

“Due to prolonged soft market conditions, we will also adopt a cautious approach to invest for growth and continue to rationalize unprofitable stores. We remain cautiously optimistic on the prospects for the remainder of the year with new products including uMagic, uInfinity Luxe, uDiva Classic and uPamper2 to sustain our position in the market.”

At its closing price of $1.39 yesterday, OSIM traded at 22.8 times trailing earnings.

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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 owns shares in OSIM International.