Biosensors

Biosensors: 2QFY14 results disappointed, as net profit fell 60% y/y to US$11.3m even though revenue increased 4% to US$83m Revenue growth was driven by 7.3% growth in Interventional Cardiology, mainly led by increased sales for DES. EMEA and Asia Pacific regions continued to lead DES sales growth with double digit sales volume growth, partially offset by the impact of lower ASPs in the various markets. Revenue was also further offset by a 3.6% and 25% decrease for Critical care and Licensing revenue. Product gross margin slid to 73% from 80% in 2QFY13 due to a change in product mix, involving lower revenue from the higher margin licensing and royalties activities (Nobori stents in Japan) and consolidation of the newly acquired cardiac diagnostics business. Higher operating expenses (+35%) also ate into profitability. Management revised downward its previous guidance of 15% top line growth, and now expects FY 14 revenue to be only “moderately positive” over FY14. Credit Suisse likes the fast rate of product launch but views downside for Japan and China to dampen earnings growth. Nevertheless, CIMB takes a contrarian Outperform view that hinges on the instant of Spectrum Dynamics, product launches, regulatory approvals and M&A accretion. Latest broker ratings as follows: CS downgrades to Neutral from O/PF, TP: $1.00 (decreased from $ 1.25) CIMB maintains O/PF with TP: $1.19 (decreased from $1.32) OCBC downgrades to sell from Hold with TP: $0.80 (decreased from 0.96)