OSIM’s Q4 profits crash 66.6% to $9.3m

Blame it on TWG Tea case legal fees.

OSIM International (OSIM) ended 2015 with another weak quarter as it posted a net profit of $9.3m, reflecting a whopping 66.6% YoY crash. On a full-year basis, net profit took a 49.6% nosedive to $51.5m.

This was on back of a one-off loss of $5.6m when ONI Australia entered into voluntary administration and $3.4m legal fees for the TWG Tea legal cases, according to a media release by the company.

Meanwhile, 4Q15 revenue dipped 5% YoY to $168.7m. For the whole of FY15, revenue tumbled 10.4% at $619.6m.

OCBC notes in a report that notwithstanding one-off items of $15.7m, the steep fall in profitability and earnings visibility remains clouded. While China is progressively transforming into a consumption driven economy, OSIM has been struggling to catch on this trend. On a net-net basis, 37 underperforming OSIM outlets were shut down in 2015.

OCBC asserts that while the launch of a new massage chair possibly in the middle of 2016, new product launches are unlikely to drive growth substantially given the soft outlook in the retail environment of most markets and OSIM’s weak performance thus far. Also, OSIM is poised to open another 15 to 20 TWG Tea stores this year, further incurring gestation costs in the process.

Moreover, OCBC says it prefers a cautious stance despite the cheaper valuations at current price level.