Saturday, November 16, 2013

Biosensors : Another shocking quarter (OCBC)

Biosensors International Group:
Fair value S$0.80
add: 12m dividend forecast S$0.025
versus: Current price S$0.925
Another shocking quarter

Biosensors International Group (BIG) turned in another poor set of results, with 2QFY14 core PATMI plunging 60.6% YoY to US$11.5m despite a 4.1% growth in revenue to US$83.0m. This was significantly below ours and the street’s expectations, as 1HFY14 core PATMI of US$23.6m (-59.0%) formed only 30.0% of our original FY14 estimates (27.4% of Bloomberg consensus). BIG also lowered its FY14 revenue guidance. While we had previously cautioned that management would have difficulty meeting its previous 15% topline growth guidance and that BIG was also facing mounting cost pressures, the situation appears to be worse than we had expected. In light of the challenging conditions surrounding BIG, we slash our FY14 and FY15 core PATMI projections by 26.9% and 19.1%, respectively. Our DCF-derived fair value estimate consequently declines from S$0.96 to S$0.80. Downgrade BIG from Hold to SELL.


2QFY14 core PATMI a gap below expectations
Biosensors International Group (BIG) turned in another lacklustre set of results, with 2QFY14 core PATMI plunging 60.6% YoY to US$11.5m despite a 4.1% growth in revenue to US$83.0m. This was significantly below ours and the street’s expectations, as 1HFY14 core PATMI of US$23.6m (-59.0%) formed only 30.0% of our original FY14 estimates (27.4% of Bloomberg consensus). 1HFY14 revenue was down marginally by 3.8% to US$159.7m, or 43.0% of our full-year forecast. Disappointingly, there was also no sequential pickup after a poor 1QFY14 as core PATMI slipped 4.9% QoQ.

Revenue guidance lowered; in-line with our prior warning
Despite continued momentum in its core drug-eluting stent sales growth in the EMEA and APAC regions (including a strong recovery in China from 1QFY14), BIG lowered its FY14 revenue guidance, highlighting that it now expects only moderate growth in total revenue. This can be attributed to ASP pressures and delays in royalty income improvement in Japan. While we had previously cautioned that management would have difficulty meeting its previous 15% topline growth guidance and that BIG was also facing mounting cost pressures, the situation appears to be worse than we had expected. Management acknowledged that operating expenses as a percentage of product revenue was on the high side, but said that it was targeting to bring this figure down by enhancing its operational efficiencies and restructuring its cost compositions.

Downgrade to SELL
In light of the challenging conditions surrounding BIG, we slash our FY14 and FY15 core PATMI projections by 26.9% and 19.1%, respectively. Our DCF-derived fair value estimate consequently declines from S$0.96 to S$0.80. Downgrade BIG from Hold to SELL, with further de-rating catalysts likely to come from continued malaise in its near-term financial performance and successful new product launches by competitors.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 13/11/13

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