OSIM International increases stake in TWG Tea by 10% to 45%

Will have incremental impact for FY13-14.

OSIM announced that it has increased its stake in associated company TWG Tea Company Pte Ltd (TWG Tea) from 35% to 45%, which astonished OCBC Investment Research for the fact thatyje 10% stake was acquired for a total purchase consideration of only S$2.

"This was because the founding members of TWG Tea had failed to meet the agreed performance target for the year ended 31 Mar 2013; although we believe that the TWG Tea business is doing well," notes OCBC. OSIM bought a 35% stake in TWG Tea for ~S$31.36m in Apr 2011.

"We estimate that this additional 10% stake will have an incremental 0.6% and 0.9% impact to our FY13 and FY14 PATMI forecasts for OSIM, respectively," predicts OCBC. "We maintain our BUY rating and S$2.21 fair value estimate on OSIM for now as the group is scheduled to release its 2Q13 results next Tue, 30 Jul."