Biosensors International Group (BIG) reported another set of torrid results which fell short of our below-consensus forecasts. 2QFY15 core PATMI plunged 61.6% YoY to US$4.4m due to a decline in revenue and compression in margins. We expect industry headwinds from intense competition and ASP erosion to remain in the near future, especially in China. Given this poor set of results and weak margins outlook, we slash our FY15 and FY16 revenue /core PATMI forecasts by 6.2%/33.1% and 5.7%/24.6%, respectively. Rolling forward our valuations to 20x blended FY15/16F core EPS, we derive a lower fair value estimate of S$0.54 (previously S$0.68), partially offset by a stronger USD-SGD assumption of 1.29 (previously 1.25). Maintain SELL.
2QFY15 results significantly below expectations
Biosensors International Group (BIG) reported another set of torrid results which fell short of our below-consensus forecasts. 2QFY15 core PATMI plunged 61.6% YoY and 55.3% QoQ to US$4.4m. The decline was underpinned by a 9.9% YoY dip in revenue to US$74.8m and compression in its operating margin by 10.1 ppt to 13.5%. The fall in revenue was in turn driven by a 45.1% slide in its licensing and royalties revenue from Terumo to US$5.9m and weakness in its drug-eluting stent (DES) business in China. This was partially offset by a single-digit YoY growth in its DES volume and revenue outside of China. For 1HFY15, revenue slipped 2.9% to US$155.0m and formed 45.4% of our FY15 forecast. Core PATMI of US$14.3m translated into a decline of 39.5%, and constituted just 31.0% and 28.2% of ours and Bloomberg consensus’ full-year estimate, respectively.
Outlook remains dampening
We expect industry headwinds from intense competition and ASP erosion to remain in the near future, especially in China, and this is likely to stifle BIG’s product gross margins. BIG’s new CEO Mr. Jose Calle Gordo assumed his role in Sep this year, and one of his key initiatives would be to bring down the overall cost structure of the group. We believe this would be a gradual process, given that BIG is scaling up its own sales force in Japan to mitigate the insipid performance of Terumo and also continuing its R&D spending on new clinical trials for its next-generation BioFreedom™ drug coated stent.
Maintain SELL
Given this poor set of results and weak margins outlook, we slash our FY15 and FY16 revenue /core PATMI forecasts by 6.2%/33.1% and 5.7%/24.6%, respectively. Rolling forward our valuations to 20x blended FY15/16F core EPS, we derive a lower fair value estimate of S$0.54 (previously S$0.68), partially offset by a stronger USD-SGD assumption of 1.29 (previously 1.25). Since we last reiterated our ‘Sell’ rating on BIG, its share price has taken another 23.5% tumble. With our reduced fair value and lack of re-rating catalysts in the near-term, we maintain our SELL rating on BIG.
Biosensors International Group (BIG) reported another set of torrid results which fell short of our below-consensus forecasts. 2QFY15 core PATMI plunged 61.6% YoY and 55.3% QoQ to US$4.4m. The decline was underpinned by a 9.9% YoY dip in revenue to US$74.8m and compression in its operating margin by 10.1 ppt to 13.5%. The fall in revenue was in turn driven by a 45.1% slide in its licensing and royalties revenue from Terumo to US$5.9m and weakness in its drug-eluting stent (DES) business in China. This was partially offset by a single-digit YoY growth in its DES volume and revenue outside of China. For 1HFY15, revenue slipped 2.9% to US$155.0m and formed 45.4% of our FY15 forecast. Core PATMI of US$14.3m translated into a decline of 39.5%, and constituted just 31.0% and 28.2% of ours and Bloomberg consensus’ full-year estimate, respectively.
Outlook remains dampening
We expect industry headwinds from intense competition and ASP erosion to remain in the near future, especially in China, and this is likely to stifle BIG’s product gross margins. BIG’s new CEO Mr. Jose Calle Gordo assumed his role in Sep this year, and one of his key initiatives would be to bring down the overall cost structure of the group. We believe this would be a gradual process, given that BIG is scaling up its own sales force in Japan to mitigate the insipid performance of Terumo and also continuing its R&D spending on new clinical trials for its next-generation BioFreedom™ drug coated stent.
Maintain SELL
Given this poor set of results and weak margins outlook, we slash our FY15 and FY16 revenue /core PATMI forecasts by 6.2%/33.1% and 5.7%/24.6%, respectively. Rolling forward our valuations to 20x blended FY15/16F core EPS, we derive a lower fair value estimate of S$0.54 (previously S$0.68), partially offset by a stronger USD-SGD assumption of 1.29 (previously 1.25). Since we last reiterated our ‘Sell’ rating on BIG, its share price has taken another 23.5% tumble. With our reduced fair value and lack of re-rating catalysts in the near-term, we maintain our SELL rating on BIG.
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