DMG downgrades Osim (O23.SG) to Neutral from Buy as the stock has breached its $1.66 target price.

Says the shares, based on yesterday’s $1.70 close, are now worth 18.5x FY11 P/E, the average multiple from 2006-2008.

Says any re-rating will hinge on whether sales from new outlets and profit margins beat expectations.

Adds, the massage-chair maker’s plan to list in Taiwan is positive as the sale of treasury shares will generate $76 million, which, together with its $54 million net cash, could mean bumper dividends or imply acquisition activity.

The shares are down 3.5% at $1.64.