Biosensors International

Kim Eng on 9 Feb 2012


Boosted by one-time remeasurement gain. Biosensors reported 3QFY Mar12 net profit of US$291.5m, which was boosted by a US$273m one-time remeasurement gain on JW Medical Systems (JWMS) that it acquired in October last year. JWMS was fully consolidated into Biosensors’ financials this quarter. Excluding this exceptional non-cash gain, recurring net profit for the quarter was US$26.8m, a 21.5% YoY increase. While revenues were in line with our forecast, the bottomline came in slightly below our expectation due to lower gross margins for its drug-eluting stent (DES) products.


Increased sales volumes to offset ASP declines. Gross margins for DES products in 3QFY Mar12 were lower due to ASP pressures in China, currency fluctuations and a change in the geographical sales mix. However, overall gross margins for the same period held up well at 78%, because of higher margins for its critical care products and increased licensing revenue. While uncertainties in ASPs continue to exist, management is confident that the potential increase in sales volumes would make up for any ASP decline.


Management revised revenue guidance upwards. Biosensors also revised its FY Mar12 sales growth guidance to 80% YoY, from 70-80% previously. This is a minor adjustment towards the top end of the previous guidance range, but it is still an indication that sales momentum must have been beating management’s expectations. We believe that management may still be erring on the conservative side in terms of sales guidance, and our forecast is for an 85% YoY growth for FY Mar12. Nevertheless, one should look beyond FY Mar12 figures as the potential for growth is greater in the years ahead.


Maintain Buy, target price $1.82. We raise our FY Mar13F revenue estimate by 4.8% in anticipation of higher sales momentum, but lower our gross margin assumption to account for pricing pressures. Consequently, our FY Mar13F net profit forecast is just 1.0% higher than before. Our SOTP-based target price is raised marginally to $1.82 from $1.80. We maintain our Buy recommendation.