Slow growth, higher opex
Price Target : 12-Month S$ 0.90 (Prev S$ 0.94)
•3Q14 below expectations as stent sales and opex disappoint
•Slower growth, lower margins playing out
•Cut FY15F/FY16F earnings by 22%/27%
•Maintain HOLD and lower TP to S$0.90
3Q14 revenue and earnings disappoint. BIG registered earnings of US$11m (-56% y-o-y) for 3Q14 on revenue of US$82.5m (+1% y-o-y). Both revenue and opex underperformed our estimates. 9M14 net profit accounts for only 67% of our full year forecast.
Slow growth, weaker margins playing out. We do not expect revenue growth to pick up significantly in the coming quarters while we believe BIG will operate at a higher opex structure going into FY15F. Reasons that revenue is unlikely to pick up significantly include management’s guidance of flat revenue growth, weak ASP, increased competition and flat licensing revenue. Conversely, we also believe that more clinical trials, marketing and research expenses will lead to a higher opex structure, which is necessary to enhance topline growth.
Cut FY15F/FY16F earnings by 22%/27%. BIG has once again failed to meet our moderated expectations since our earnings cut in the previous quarter. We continue to lower our growth and margin assumptions. After factoring muted revenue growth and significantly higher opex structure going forward, we expect earnings for FY15F to decline slightly before recovering in FY16F.
Maintain HOLD, with lower TP of S$0.90. Further to our earnings reduction, our SOTP-based TP is lowered to S$0.90, and implies 29x FY15F PE, in line with peer average. Maintain HOLD.
Publish date: 13/02/14