Price (S$) 0.87
12 month price target (S$) 0.93
Below expectations on continued Japan weakness, pricing pressure
What surprised us
Biosensors (BIG) reported 3Q/9MFY14 results that were below our expectations, with revenues of US$82/242 mn, +1%/-2% yoy (FY14 GHe +3%) and NPAT of US$11.1/34.5 mn, down 54%/60% yoy (FY14 GHe -44%). Interventional Cardiology (IVP) sales increased 2% yoy (vs. -7%/+7% in 1Q/2Q) as volume growth (double digit in EMEA/APAC) offset price reductions.
Royalties revenue dropped 21% yoy (vs. -33%/-25% in 1Q/2Q) as sales in Japan remained weak, yet 3Q royalties stabilized qoq as Nobori sales picked up as growth in the sale of new products from competitors (e.g. Abbott’s XIENCE Xpedition launched in July 2013) levelled off post the introduction phase. GP margin dropped 741bps yoy (vs. -573bps/ -681bps in 1Q/2Q) due to the consolidation of Spectrum Dynamics with a GPM of c.48%. Co-promotion of Nobori DES with Terumo in Japan also contributed to the drop in GPM. Management guided to FY14 sales being comparable to FY13, citing lower ASP/royalty revenue.
What to do with the stock
We remain Neutral as we attribute the 3QFY14 miss to the continued slowdown in the Japanese stent market and downward pricing pressure in the stent market worldwide. The lack of compelling new product launches from Biosensor’s IVP and other product segments may continue to weigh on growth. Valuation: We reduce our revenue/EPS forecasts by 2%-9%/ 16%-18% for FY14E-16E to reflect lower IVP sales. Thus, we cut our 12-m EV/GCI vs. CROCI/WACC-based TP to S$0.93 (from S$1.01), implying 7% upside potential and 25X/21X FY14E/15E recurring P/E. Risk: Upside/downside: Uncertainty of pricing and regulatory approval.
Source/Extract/Excerpts/来源/转贴/摘录: Goldman Sachs
Publish date: 13/02/14