Friday, February 21, 2014

Biosensors International Group: Weaker than expected 3QFY14 showing (OCBC)

Biosensors International Group:
Fair value S$0.77
add: 12m dividend forecast S$0.025
versus: Current price S$0.87
Weaker than expected 3QFY14 showing

Biosensors International Group (BIG) reported another set of lacklustre results, with its 3QFY14 core PATMI dipping by 54.2% YoY to US$11.1m despite a mild 1.4% increase in revenue to US$82.5m. This fell short of our below-consensus forecast. BIG continued to face weak licensing and royalties revenues, coupled with ASP and cost pressures.
Management has initiated on cost reduction and organisational restructuring plans, and expects to see an improvement from 4QFY14. Given the continued industry challenges, BIG expects its FY14 revenue to be comparable with FY13. This is in contrast to its guidance made in 2QFY14 in which it expected total revenue growth to be moderately positive over FY13. We pare our FY14 and FY15 core earnings projection by 16.3% and 6.7%, respectively, and maintain our SELL rating on BIG with a lower DCF-derived fair value estimate of S$0.77 (previously S$0.80).

3QFY14 results below expectations
Biosensors International Group (BIG) reported another set of lacklustre results, with its 3QFY14 core PATMI dipping by 54.2% YoY to US$11.1m despite a mild 1.4% increase in revenue to US$82.5m. Sequentially, revenue and core earnings fell by 0.6% and 3.3%, respectively. For 9MFY14, BIG’s revenue of US$242.2m represented a 2.1% decline, and formed 71.7% of our FY14 estimates. Core PATMI fared worse, falling by 57.6% to US$34.7m, forming 60.4% of our full-year forecast and just 51.5% of Bloomberg consensus’ FY14 estimate.

Need to control its operating expenses
Although BIG managed to record a 6.1% YoY growth in its product revenue in 3QFY14, this was largely offset by continued weakness in its licensing and royalties revenues (-21.4% YoY). However, management believes the situation in Japan is stabilising, as exemplified by the relatively flat licensing and royalties revenues on a QoQ basis (-1.1%). The global drug-eluting stent (DES) industry continues to face ASP pressures, while cost pressures also remain a concern as SG&A expenses stayed elevated as a percentage of BIG’s product revenue (3QFY14: 54.1%; +1.7 ppt YoY and +3.8 ppt QoQ). Management has initiated on cost reduction and organisational restructuring plans, and expects to see an improvement from 4QFY14.

Maintain SELL
Given the continued industry challenges, BIG expects its sales growth for FY14 to be weak, and guided for total revenue to be comparable with FY13. This is in contrast to its guidance made in 2QFY14 in which it expected total revenue growth to be moderately positive over FY13. We pare our FY14 and FY15 core earnings projection by 16.3% and 6.7%, respectively, and maintain our SELL rating on BIG with a lower DCF-derived fair value estimate of S$0.77 (previously S$0.80).



Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 13/02/13

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