OSIM International's new massage chairs to drive 2013 profits

New product lines to "revitalize demand," says Maybank.

Here's more from Maybank Kim Eng:

Exciting new line-up of chairs. We expect OSIM to roll out two brand new massage chairs in 2013. These will be the successors to its uSoffa and uDivine lines, but with totally new designs and functions. The latter was introduced in Nov 2010. OSIM typically aims for a 2-3 year product cycle with its flagship chairs which will come to an end in 2013. We expect these eagerly-anticipated new chairs to revitalize demand and provide a sizeable boost to sales, especially in its first year of introduction.

Possible impact of new massage chair launch. We estimate that OSIM’s flagship massage chair makes up as much as 40% of overall Group sales. Like-for-like numbers of stores, new chairs are likely to generate greatest sales interest in its first year. We therefore think these launches will likely have a material impact on revenue in 2013.

The uDivine massage chairs were first launched with well-known celebrity Andy Lau in November 2010, in Hong Kong, Singapore and Malaysia. 1Q2011 is therefore the first full-quarter impact of new sales. This quarter saw a 12% qoq sales growth. This is unlikely to be just a seasonal impact given that both Q1 and Q4 have been strong historically. On a yoy basis, there was also a 16% sales growth in 1Q11. In our modeling, we assume a similar type of impact from these new launches.