Biosensors

4Q14 results came in below estimates, with net profit slumping 80% y/y to US$6.1m, taking FY14 net profit to US$40.6m (-65%). Revenue for the quarter fell 8% to US$81.6m, largely due to a 14% decline in revenue from interventional cardiology (stent sales) to US$63m, which contributed 77% of total revenue, as well as weak royalty income (-14.4%). This was partially offset by higher revenue from the group's other product segments - critical care and cardiac diagnostic – which grew 12% to US$3.5m and 73% to US$4.5m respectively. Gross margin contracted to 76% from 84% previously, largely due to distribution activities in Japan for the Nobori stents and the consolidation of the group’s newly acquired cardiac diagnostic business, both of which command lower margins. Bottom-line was further eroded by a 25% rise in sales and marketing expenses to US$29.7m and provision of US$3.9m for restructuring, offset partially by a 58% drop in R&D expenses to US$4.3m. Management note that the global DES market faced increased competition and price erosion in FY14 and expects these challenging market conditions to persist going into FY15. Moving forward, the group aims to bring in new innovative products, expand its product range and enter new geographical territories to improve its performance. At the current price, Biosenors trades at 35.5x FY14 P/E. The group remains in a healthy net-cash position of US$222.2m, representing 16.4¢ per share. Nevertheless, investor attention would most probably be focused on a possible acquisition by major shareholder CITIC Private Equity Fund, which recently updated that it is still considering the options available to enhance the value of its investment in Biosensors. Under SGX takeover rules, any offer by CITIC would have to be tabled at a minimum $1.05 per share – the price at which it recently acquired its existing 21.7% stake Latest broker ratings as follow: CIMB downgrades to Hold from Add with TP $1.01 Deutsche maintains Sell with TP $0.64