STI : 3,180.25
Price Target : 12-Month S$ 0.94 (Prev S$ 1.09)
• 2Q14 results below; stent sales and licensing revenue disappoint and margins weaken
• Soft outlook on weak revenue growth and lower margins
• Cut FY14F/FY15F earnings by 30%/38%
• Maintain HOLD, TP reduced to S$0.94
2Q14 below expectations on disappointing sales and margins. 2Q14 earnings of US$11.3m were below our expectations, with both revenue and margins coming in below our projections. Margins were weaker on lower than expected licensing revenue contribution from Japan (which underperformed our estimate by 10%) and higher opex. 1H14 net profit accounts for only 31% of our previous full year forecast.
Soft outlook on weak revenue growth, lower margins. We believe outlook for BIG will remain soft as we see margins trending down from the weak pricing environment and poorer sales mix. Management has also revised their revenue guidance for FY14F from 15% growth to moderately positive.
Moderated revenue growth and lower margin structure. On the back of slower than expected sales growth in 2Q14, higher than expected margin decline and management’s guidance of a moderately positive sales growth in FY14F, we have cut FY14F/FY15F earnings by 30%/38%.
Maintain HOLD, TP reduced to S$0.94. Following our earnings cut, our SOTP-based TP is lowered to S$0.94, which implies 24x FY14F PE, in line with the peers’ average. Maintain HOLD.
Publish date: 13/11/13