Biosensors vs Techcomp

Biosensors has just had an improved quarter - For 1Q FY11, net profit was US$3.2 million compared to net earnings of US$4.2 million previously Excluding the restructuring charges related to the closure of the US operations, net profits would have been US$9.2 million. Mr. Jump: “Our operating profits remain strong, nearly double our 1Q FY10 operating profits. Our decision to close our US operations will help further reduce costs and simplify our operating structure. We believe that this closure will be completed by 31 December 2010. Key US staff and activities are being transferred to our existing operations hubs in Singapore and Switzerland. Our new structure will not only result in lower costs going forward, but will help reduce complexity and time-to-market for development of our next generation technologies.”

Read in another forum that Nomura Singapore was bullish on Biosensors after the quarterly result and maintained its $1.20 target price. Anyone has excerpts of it? The market yesterday was pessimistic and sent the stock down by 2 cents to 80.5 cents

Nomura S'pore says:

Microport IPO price likely to be at the high-end. Based on our channel checks, we understand that market response to Microport's IPO is good. At the high end of the indicated range (HK$4.60~HK$6.10), Microport's IPO valuation is at 25x FY10 P/E (Dec-end), according to the company. In contrast, Biosensors is trading at 18x FY11F P/E (Mar-end) on a strong FY12F EPS growth of 52% (12x FY12F P/E), driven by the impending approval of Nobori in Japan.

Similar product, but different geographical exposure. Both Microport and Biosensors are broadly single-product companies focused on drug-eluting stents. However, Microport is a pure China play while Biosensors has a more diversified growth profile with three pillars of growth: i) core franchise which is well-established in the EU, ii) China exposure via 50%-owned JV JWMS, iii) Japan exposure via licensing agreement with Terumo.

Recent CE approval reflects group's strategy to expand portfolio. BIG recently received CE approval for longer length versions of its flagship BioMatrix Flex, which offers a significant opportunity to increase market penetration as an estimated 15% of DES usage involve long lengths. We believe this reflects the group's strategy to expand its product offerings, exemplified by the recent acquisition of CardioMind.

Reiterate BUY - catalysts yet to play out. BIG has rerated on the news of Microport's IPO (+7% this morning). We believe the stock will continue to trend towards our PT of S$1.20, driven by catalysts such as BioFreedom's clinical trial results (to be announced next Tuesday at TCT conference) and the Japanese approval of Nobori by Terumo.

Nomura's price target of 1.20 has been hit and the stock has corrected below that level to 1.14.

Not much upside now for this good business, as PE for this year is about 31X and next year 28 X, according to DBS Vickers.