FAIR VALUE -> S$2.05, currently trading at S$2.01
THESIS
My original target price for OSIM based on the comps as well as the potential EBITDA per store was S$1.80, updating that for recent earnings and comps, my updated price target is S$2.05. OSIM has surpassed that target and could potentially continue the trend however, there are two things that concern me:
Fair Value -> S$2.70, currently trading at S$1.04
I’ve had a couple of readers request that I look at China Minzhong. It appeared on my original Singapore screen but I passed it up because of the S-Chip link. I subsequently decided to have another look at the company and since it’s had a bit of a run lately, I thought I’d see if it’s justified on valuation grounds or just a victim of the January effect.
Thesis
China Minzhong is a leading vertically integrated vegetable processor in China currently trading at 4.0x 2013F earnings. As the free cashflows continue to grow with earnings and market begins to understand and appreciate the business China Minzhong has the potential to see a rerating and failing that the growing earnings will mean an investor will still be compensated for the risk taken.
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Fair Value – >S$4.00, currently trading at S$1.35
Thesis
STX OSV (STX) is currently stuck in the mud because of pending rumours of a fire-sale to an Italian Ship Builder (Fincantieri). While the EV/EBITDA multiples and high ROE suggest that STX is worth significantly more than its current price (>S$4.00), rumors circulating surrounding the sale are suggesting that the sale could go ahead for 900bn KRW, which would only represent ~S$1.60 vs the current price of S$1.35.
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Fair Value –> S$1.80, currently trading at S$1.4650
Thesis
OSIM is a high margin business that is producing lifestyle products targeted at the increasing upper-middle income demographic. OSIM is currently expanding existing store footprint, while deploying cash that was raised via a bond offering in other strategic investments and share buy-backs. As the current cash hoard is used the business will return to previous RoE levels, which at ~50% beats the competition.
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I’ve recently been looking into the regulations surrounding setting up a formal fund management company in Singapore. There have been a number of proposed changes to the regulatory framework recently, which will limit new fund managers who want to set up shop in Singapore. While these regulations won’t stop a majority of fund managers setting up, I’m unsure whether they’ll have their intended consequence – increasing investor confidence and reducing the impact of a macro shock – in the current form. A more finessed version would be a more appropriate remedy for an industry that has been chewing on a bitter pill for the past couple of years.
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