Biosensors

Biosensors: 3QFY14 missed estimates net profit slumped 51% y/y to US$11.1m while revenue was flattish (+1%) at US$82.5m. Increase in Product revenue (+6% to US$71m) , which was led by a 2% increment (to US65.4m) contributed by drug-eluting stents (DES) sales in EMEA and Asia Pac was offset by a 21% decrease in Licensing and royalties revenue. R&D expenses increased 77% to ~US$10m, due to increased investment in clinical trials (inclusive of Excel 2 in China) and the global study of BioFreedom, and consolidation of expenses from the cardiac diagnostic business unit. CS believes going private and IPO in HK/ China is viable for Biosensors to unlock value, as: 1) Biosensors has ~US$500m cash (and equivalents) with a 37.5% share held by 2 of the largest PE firms in China and ~52% free float 2) Recently appointed industry veteran Mr Jiang Qiang (ex-CFO of Shandong Weigao) as COO 3) Citic PE’s recent share acquisition piece of $1.05 from Shandong Weigao CIMB expects new shareholder Citic PE is expected to have a lot more say in the globalization of Biosensor’s business and restructuring initiatives aimed at improving efficiency and profitability. Latest broker ratings as follows: CS maintains Neutral with TP$1.00 CIMB maintains Add rating with TP$1.19 OCBC maintains Sell with TP cut to $0.78 (from $0.92)