Here's why Osim is unfazed by China's slowdown

Credit tightening will not affect sales.

According to CIMB, management is not worried about a slowdown in China. This is because most of the purchases are paid by cash, not credit, unlike the other four markets. 

"Any tightening of credit would not affect sales. OSIM will continue to selectively open 20-30 stores annually. It could easily open more but stressed that being selective about the malls and department stores to operate in is crucial to profitability. SSSG in China is high single digit," says CIMB.

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TWG could contribute significantly soon. TWG is performing well as management’s deliberate positioning of the brand as the “Louis Vuitton” of tea has been very successful. Gross margins are north of 70% and the  brand’s reputation continues to grow.

This business could be a bigger contributor to earnings than GNC over time. Earnings contribution today, however, is negligible. Management is continuing to secure new stores in high-end malls.

It will be opening stores in KLCC, Jakarta and Bangkok, with the Thai princess due to grace the opening of its Bangkok store in Siam Paragon.

TWG is also available at luxury hotels and the premium class of some airlines. Hotels in particular are a fast-growing distribution channel. Agreements have been signed with major hotel chains.