(BN) Osim’s Massage Chairs Link IPhones to Tap Buyers: Southeast Asia

Aug. 3 (Bloomberg) -- Osim International Ltd., Asia's biggest maker of massage chairs, is tapping on Apple Inc.'s iPhone to help boost sales to younger buyers.

The app will allow users of its latest chairs, which cost S$5,588 ($4,484) each, to download new massage programs that cater to individual needs, Ron Sim, chief executive officer of the Singapore-based company, said in an interview. More massage sequences, such as those for tennis or golf players, may be rolled out and downloaded to existing chairs, he said.

"That means the programs in the future will be infinity," Sim, 53, said yesterday in Singapore. "This business is about well-being and we need to continue to innovate products to innovate demand."

Osim, which sells a variety of massage and so-called well- being products in 26 countries, is banking on new technologies to boost sales in the key markets of China, Hong Kong, Taiwan and Singapore. The iPhone strategy is crucial as Osim expands sales of its products, including new chairs called uDivine App, among customers in their 20s and 30s, Sim said.

The iPhone feature, which connects wirelessly to the chair through Bluetooth, also works on the iPad, he said. A similar product may eventually be added for phones using other mobile technologies, said Sim, who has run his company for more than three decades.

"It's part of their constant drive to innovate products," said James Koh, a Singapore-based analyst at Maybank Kim Eng Holdings, who rates the stock outperform. "For people who have not bought a uDivine chair, that is possibly a very good reason to buy one now."

Installment Plans

Osim's massage chairs, which start at S$2,000, make up 50 percent of its sales and may rise to 60 percent of revenue in three to five years, said Sim, who was named Best CEO for the mid-cap category at the Singapore Corporate Awards last month.

To tap younger buyers, Osim is also offering installment payment plans, Sim said, adding that "a two-hour spa session costs more than an installment."

Osim last week reported second-quarter profit climbed 20 percent to S$22.5 million, while sales increased 12 percent to S$155 million.

"Eventually the strategy for them is to slowly phase out the older chairs," said Brandon Ng, a Singapore-based analyst at UOB Kay Hian, who has a buy rating. "This is just another strategy for them to introduce new products," and the higher price will improve the company's margins, he said.

All nine analysts who track the stock rate it a buy, according to data compiled by Bloomberg. Osim shares have risen 8.2 percent this year, lower than the 15 percent advance in the Singapore benchmark Straits Times Index.

Slowing Growth

The company is also expanding as its biggest markets face slowing growth. China's manufacturing teetered on the edge of contraction in July while Singapore's economy unexpectedly shrank last quarter, adding to signs of a deepening slowdown in Asian growth as Europe's debt crisis curbs demand for the region's goods.

Osim, which operates GNC Holdings Inc. stores in Asia- Pacific markets such as Singapore, Malaysia, Taiwan and Australia, and owns the Brookstone Inc. chain of specialty items in the U.S., expects Asia to drive its growth. Osim expects to list the Merrimack, New Hampshire-based Brookstone within three years, he said.

With S$196 million in cash and no debt, Osim is also seeking acquisitions that could expand its lifestyle and well- being business, Sim said. The company owns a stake in TWG Tea Co., a Singapore-based high-end tea retailer.

"As long as the market is uncertain, we have a better bargaining power," he said. The company isn't planning to seek financing for acquisitions as "we are looking for companies with growth potential."

'Real Growth'

The outlook for sales remain positive because of the low penetration rate for massage chairs in its key markets, said Sim, who has seven of these products at home, including four in his karaoke room.

About 5 percent of households in Singapore and Hong Kong own massage chairs, he said, compared with 30 percent in Japan. Osim, which has the biggest market share in the two cities, expects the penetration rate for these markets to reach the level in Japan within 10 years, he said.

In China, less than 1 percent of the households in the cities it operates in own massage chairs, he said.

"That's where the real growth is," Sim said. "There's still a lot of upside."