GIVEN the huge size of the Chinese market (US$500 million), we think there will be ample headroom for earnings growth, through JWMS and Biosensors' BioMatrix. We make no changes to our 'outperform' rating, earnings estimates or sum-of-the-parts target price.
We find the replacement of a co-CEO system with the more conventional single-boss structure appealing, giving clarity and well-defined roles.
Jack Wang (ex-JWMS CEO) will lead the group henceforth, which is now well placed to diversify. He is seen as the natural achiever of the group's long-term ambition of becoming a first-class global medical device company.
Jeffrey Jump will continue to do what he does best, in sales and marketing, and remain as an executive member of the board.
BIG has been offered an opportunity by JTC Corp to develop a new manufacturing and R&D innovation centre in Singapore. The acquisition consideration of $6.2 million is understood to be a third of the market price of similar plots of land.
The overall facility costs could be more economical than long-term leasing. Also, by funding construction with commercial bank loans, BIG should be able to minimise upfront cash outflows for this investment.
We like BIG for its clear earnings visibility and high growth expected in the near term backed by strong licensing revenue in Japan and the full consolidation of JWMS.
Yet, the biggest catalyst, SFDA approval for the launch of BioMatrix (with the more efficient Bio A9 drug) in China, has yet to come.
BIG now owns 25 per cent of the DES market in China, and approval for BioMatrix could swell this number, turning it into the biggest player there.
OUTPERFORM
OUTPERFORM
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