Shandong Weigao (SW), which is Biosensors International Group’s (BIG) largest shareholder, announced that it has agreed to dispose its entire 21.7% stake in BIG to CB Medical Holdings Limited (CBMH) at a sale price of S$1.05 per share. According to a SGX-net filing, CBMH is part of CITIC Private Equity Funds Management, a large private equity fund in China. As SW will incur a loss of ~CNY449.0m from this transaction, we believe it also partly reflects the lack of confidence in BIG’s prospects going forward. We do not foresee any impact from SW’s sale on the operations of BIG. While we do not rule out the possibility of a privatisation exercise on BIG by CBMH in the future, we continue to value the stock based on our expectations of its operational performance. Hence, maintain SELL and S$0.80 fair value estimate on BIG.
Shandong Weigao to sell its entire 21.7% stake in BIG
Shandong Weigao (SW), which is Biosensors International Group’s (BIG) single largest shareholder, announced that it has entered into a Sale and Purchase Agreement to dispose its entire 21.7% stake in BIG to CB Medical Holdings Limited (CBMH). The total aggregate consideration of US$312.3m translates into a purchase price of S$1.05 per share by CBMH. This represents a 11.2% premium to BIG’s closing price prior to this announcement. CBMH is an investment holding company incorporated in Bermuda. According to a SGX-net filing, it is part of CITIC Private Equity Funds Management, a large private equity fund in China. SW cited the increasingly competitive business environment in China and its decision to focus on its three core business units in which it has controlling equity interests as its reasons for disposing its stake in BIG. As SW will incur a loss of ~CNY449.0m from this transaction, we believe it also partly reflects the lack of confidence in BIG’s prospects going forward.
Transaction unlikely to impact BIG’s operations
We do not foresee any impact from SW’s sale on the operations of BIG. While both companies have healthcare operations in China, BIG has operated independently from SW even when SW became a shareholder of BIG. This is because BIG has its own established manufacturing facilities, distribution channels and networks in China. SW also does not compete with BIG, nor is it a supplier or customer of BIG.
Valuations rich; maintain SELL
While we do not rule out the possibility of a privatisation exercise on BIG by CBMH in the future, we continue to value the stock based on our expectations of its operational performance. Hence, with our estimates kept intact, we maintain our SELLrating and S$0.80 fair value estimate on BIG. Given the recent hike in BIG’s share price and with BIG now trading at a rich valuation of 20.7x blended FY14/15F PER, we believe it is an opportune time for investors to lock in some profits.
Shandong Weigao (SW), which is Biosensors International Group’s (BIG) single largest shareholder, announced that it has entered into a Sale and Purchase Agreement to dispose its entire 21.7% stake in BIG to CB Medical Holdings Limited (CBMH). The total aggregate consideration of US$312.3m translates into a purchase price of S$1.05 per share by CBMH. This represents a 11.2% premium to BIG’s closing price prior to this announcement. CBMH is an investment holding company incorporated in Bermuda. According to a SGX-net filing, it is part of CITIC Private Equity Funds Management, a large private equity fund in China. SW cited the increasingly competitive business environment in China and its decision to focus on its three core business units in which it has controlling equity interests as its reasons for disposing its stake in BIG. As SW will incur a loss of ~CNY449.0m from this transaction, we believe it also partly reflects the lack of confidence in BIG’s prospects going forward.
Transaction unlikely to impact BIG’s operations
We do not foresee any impact from SW’s sale on the operations of BIG. While both companies have healthcare operations in China, BIG has operated independently from SW even when SW became a shareholder of BIG. This is because BIG has its own established manufacturing facilities, distribution channels and networks in China. SW also does not compete with BIG, nor is it a supplier or customer of BIG.
Valuations rich; maintain SELL
While we do not rule out the possibility of a privatisation exercise on BIG by CBMH in the future, we continue to value the stock based on our expectations of its operational performance. Hence, with our estimates kept intact, we maintain our SELLrating and S$0.80 fair value estimate on BIG. Given the recent hike in BIG’s share price and with BIG now trading at a rich valuation of 20.7x blended FY14/15F PER, we believe it is an opportune time for investors to lock in some profits.
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