Osim Slumps by Most in Five Years on Earnings: Singapore Mover

Osim International Ltd., Asia’s largest maker of massage chairs, slumped by most in more than five years after posting an unexpected drop in profit.

Osim tumbled 14 percent to S$1.935 at the close in Singapore, its biggest decline since February 2009. The benchmark Straits Times Index gained 0.4 percent. About 30.2 million Osim shares have changed hands today, about 18 times more than the average daily volume in the past 12 months, according to data compiled by Bloomberg. The company yesterday reported third-quarter profit dropped 28 percent to S$16.4 million ($13 million) from a year earlier.

“The results were a huge disappointment,” CIMB Group Holdings Ltd. analysts led by Kenneth Ng wrote in a note. “Osim blamed TWG Tea’s setup costs in four cities in North Asia, plus legal costs in two disputes that weighed down performance.”

Osim owns 70 percent of TWG Tea Co., which retails tea and operates cafes in Asia, Australia, the Middle East and the U.S.

The weakening performance of Osim’s core business is also worrying, according to CIMB. While the company reported a 3 percent increase in sales during the last quarter from a year earlier, the brokerage said revenue would have been down 4 percent if topline contributions from TWG were excluded.

“We think profits will stay weak before it gets better,” Ng said. “There will be a lower share price to buy into this company.”

CIMB cut its rating on Osim to hold from add and reduced its share-price forecast by 41 percent to S$2.37. Macquarie Group Ltd. kept its underperform rating and lowered its price target to S$1.90 from S$2.30.

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