Biosensors: Placement of 216.3m new shares (20% of existing share base) at $0.9283/sh to raise $200.8m, to invmt boutiques Atlantis Investment and Ever Union Capital. Each will take up an 8.2% stake. Both funds have track record investing in medical technology/ healthcare related sectors in the PRC.
Proceeds may be used for invmt in clinical trials, capex, potential new acquisitions, working capital, and possible repayment of borrowings…
Post placement, historical P/E rises to 32.4x from 26.9x, based on last close at $1.04. Expect stock price to react negatively due to dilution concerns (EPS to drop ~2%/7% for FY11/12E) and the hefty 11% discount of issue price vs last traded. There could also be further disappointment as mkt talk regarding possible M&A did not materialize.
Near term, we see technical support at $0.88-0.90 levels, which coincides with the Jan ’10 high and Hony Capital’s acquisition price...
Fundamentally Nomura maintains at Buy, but lowers TP to $1.40 from $1.50.
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