OSIM International is down 1.23% at $1.605 after Taiwan’s Food and Drug Administration reportedly found excessive levels of pesticide residues in OSIM’s majority-owned TWG Tea's “Chamomile Green Tea” that was exported from India.
In a morning note by UOB Kay Hian, analyst Brandon Ng says while OSIM has made no official announcement on this issue, a spokesman from TWG Tea has reassured consumers that the product in question had passed Singapore tests but was rejected in Taiwan due to differing tests conducted on its products in different territories.
Ng says the TWG Tea segment currently forms less than 10% of OSIM’s revenue but due to the initial set-up costs and legal expenses, it has yet to be profitable. In the near term, while there may be reputational risks with regards to TWG Tea’s products, we believe TWG Tea will take this opportunity to implement stricter checks on its suppliers to prevent such cases from occurring again.
“On the larger picture, we think investors should be more concerned over the weaker retail outlook as OSIM's core earnings have been affected by a slowing economy in the last few quarters,” says Ng.
UOB Kay Hian in therefore maintaining its “hold” call and target price of $1.56.
OSIM is set to report its 3Q15 earnings this late-October to early-November.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
In a morning note by UOB Kay Hian, analyst Brandon Ng says while OSIM has made no official announcement on this issue, a spokesman from TWG Tea has reassured consumers that the product in question had passed Singapore tests but was rejected in Taiwan due to differing tests conducted on its products in different territories.
Ng says the TWG Tea segment currently forms less than 10% of OSIM’s revenue but due to the initial set-up costs and legal expenses, it has yet to be profitable. In the near term, while there may be reputational risks with regards to TWG Tea’s products, we believe TWG Tea will take this opportunity to implement stricter checks on its suppliers to prevent such cases from occurring again.
“On the larger picture, we think investors should be more concerned over the weaker retail outlook as OSIM's core earnings have been affected by a slowing economy in the last few quarters,” says Ng.
UOB Kay Hian in therefore maintaining its “hold” call and target price of $1.56.
OSIM is set to report its 3Q15 earnings this late-October to early-November.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
0 comments:
Post a Comment