Friday 9 November 2012

Biosensors International Group

OCBC on 8 Nov 2012


Biosensors International Group (BIG) reported a 28.3% YoY increase in its revenue to US$79.8m and a 35.6% surge in its core PATMI to US$29.2m for its 2QFY13 results. Revenue missed our forecast by 10.7% but core PATMI matched our S$29.3m estimate, largely due to better-than-expected operating margin and lower effective tax rate. Although licensing revenue was disappointing (-29.4% YoY), we believe that a recovery in 2HFY13 is likely. BIG continued to experience robust growth in the EMEA and Asia-Pacific regions, underpinned by market share gains. Management maintained its 20-30% sales growth guidance for FY13. We have fine-tuned our assumptions and our DCF-derived fair value estimate inches down slightly from S$1.70 to S$1.69. Maintain BUY.

2QFY13 core PATMI in line but revenue misses
Biosensors International Group (BIG) reported a 28.3% YoY increase in its revenue to US$79.8m and a 35.6% surge in its core PATMI to US$29.2m for its 2QFY13 results. Revenue missed our forecast by 10.7% but core PATMI matched our S$29.3m estimate, largely due to better-than-expected operating margin and lower effective tax rate. BIG’s strong 56.2% YoY product revenue growth was driven by a solid 140% increase in units sold for its drug-eluting stents (DES). However, this was partially offset by weaker licensing revenues (-29.4% YoY) from Terumo Corp (Terumo), which can be attributed to market share loss for its Nobori® DES due to new product launches by three competitors and a downward revision (~15%) in reimbursement prices in Japan. For 1HFY13, revenue and core PATMI jumped 39.3% and 25.7% YoY to US$166.1m and US$57.5m, respectively.

Licensing revenues likely to improve HoH in 2H
Terumo would increase its focus on regaining its Nobori® market share in Japan in 2HFY13. The absence of major new product launches in 2HFY13, coupled with more aggressive marketing activities, would likely enable its sales to return to normalised levels as hospitals typically stock up on new product launches.

Maintain BUY
BIG highlighted that it continues to see robust growth in the EMEA and Asia-Pacific regions, which we believe was underpinned by its strong clinical evidence. Although the European DES market was flat or even declining for certain countries, BIG still managed to deliver higher YoY sales growth there, which implies market share gains from competitors. Management maintained its revenue growth guidance of 20-30% for FY13. We now expect sales to come in at the lower end of BIG’s guidance after trimming our FY13 forecast by 3.2% (FY14 by 2.6%). Our PATMI estimate is only slightly lowered by 0.3% for FY13 and 0.6% for FY14 as we raise our margin assumptions. Our DCF-derived fair value estimate inches down from S$1.70 to S$1.69. BIG’s share price has rebounded 6.5% since we highlighted in our 2 Nov 2012 report that its recent sell down was likely overdone. Maintain BUY.

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