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Is Biosensors a good buy?
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metaphoricsymbol
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18-Feb-2011 16:31
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My prediction of it dropping to 96 cents and then recoviring is coming true. Hope it will reach 1.08, as predicted, soon. (though think today already attained its high at 1.03 and likely close around 1.01). And hope Nobori will get MHLW soon and not wait for MHLW" s new financial year in April.
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JustForFun
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18-Feb-2011 15:19
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Nomura's report. More cash but with EPS dilution
Share dilution of 17% but balance sheet strengthened
With the issuance of 216mn shares, we estimate that EPS will be diluted by 2%/17% for FY11/12F. However, the groups balance sheet will improve significantly with a net cash of US$188mn. Biosensors has earmarked 80% of this for clinical trials, M& A and repayment of borrowings and the balance for working capital purposes.
‚ Greater flexibility with stronger balance sheet
With the strong balance sheet, Biosensors can pursue clinical trials to strengthen its new BioFreedom product and seek out new M& A targets in China to strengthen its product range. In addition, it can also repay its S$48.75mn in bonds (8.5% interest rate) if bondholders choose to redeem.
ƒ New shareholders are seasoned healthcare investors
Atlantis is a US$4bn fund invested in various sectors in China including healthcare. Among other investments, it owns an 11% stake in Shandong Weigao. Ever Union is a fund that invests in China especially in financial services, healthcare, infrastructure and tech. With Hony Capital as a major shareholder (diluted to 21%) as well, Biosensors can avail of the significant expertise and network of its three largest institutional shareholders.
„ Re-rating factors: Nobori approval in Japan
With the pullback in the share price, we believe Biosensors remains attractively valued even after accounting for the dilution from the placement. The key catalysts are the approval of the Nobori stent in Japan, potential listing in Hong Kong and CE Mark for its nextgeneration BioFreedom stent.
Share placement
Why raise money?
Although Biosensors is in a net cash position, the group appears to be embarking on a more aggressive expansion path, in our view. It indicated that 80% of the S$200mn raised will be used for clinical trials, acquisition of assets and repayment of borrowings and the balance for working capital purposes.
With Hony Capitals strong network in China, it is conceivable that Biosensors may have taken a more ambitious strategy in the healthcare market in China including expanding its position in the stent market and perhaps making acquisitions as well, in our view. Note also that although BioFreedom is currently awaiting CE Mark approval, the group will have to address the US market eventually, and this means that it will need to invest in clinical trials in the US.
The group has outstanding bonds of S$48.75mn (8.5% interest rate) which can be redeemed at the option of the bond holders if the 25% single-shareholder threshold is triggered. Having funds available will enable Biosensors to repay bond holders without affecting its cashflow position.
Who are Atlantis and Ever Union?
Atlantis is a US$4bn fund that invests in various sectors in China including healthcare. Among other investments, it owns an 11% stake in Shandong Weigao.
Ever Union is a fund that invests in China, especially in financial services, healthcare, infrastructure and tech. Biosensors considers the new shareholders strategic and believes they can help it grow in China.
Although Hony Capitals 24.3% stake will be diluted to 21%, we believe it may, in the future, raise its stake to as high as 30%, which was its original intended stake when it first announced its investment in BIG.
With three large institutional shareholders with extensive experience in the healthcare sector in China, Biosensors has the opportunity to avail of their network and expertise for its expansion.
Rerating factors Nobori approval in Japan
Biosensors share price had pulled back in sympathy with the China medtech stocks. We believe Biosensors remains attractively valued even after accounting for the dilution from the placement. Our EPS and price target have been adjusted to account for the dilution in shares (our SOTP valuation methodology remains unchanged). With the strong financial results for 3Q11, we think there are upside risks to our forecasts given the strong momentum and the potential of earnings-accretive M& A. Near-term catalysts include the approval of the Nobori stent in Japan, the possible listing of its shares in Hong Kong and CE Mark for the new BioFreedom stent. |
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infancybird
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18-Feb-2011 11:55
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Have been paying attention to this biosensor forum and it is not difficult to see two completely opposite group of writers giving their respective views on BIG and its most recent development of share placement. One group are long term value investor who has vision of BIG being the next Boston scientific while another group of day traders and very short term players who like BIG to be very volatile so that they can short or flip very fast to make quick profit. Hence it is not surprising to see the former praising this share placement as very positive while the latter curse and swear at the management for spoiling their plan. Gentlemen, this is the purpose of this forum and all can express their views but all must do it gentlemanly and honestly. This will allow both groups to learn from each other and who knows it may convert one to another or vice versa. You are all value contributors and good luck to you.
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investor
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18-Feb-2011 11:27
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I think there is some confusion here. Who is the management ? and who is the shareholder ? Don't forget, Hony is the largest shareholder, with a 24.9 % share of the company (paid for in cold hard cash ), being in the board of directors, they must have sanctioned the private placement ! If they being the largest shareholder are willing to allow dilution of the shares, they must see something good in it (AND BEING IN THE BOARD OF DIRECTORS), they should have a vision of where the company is going and what it is going to do with the money. 2ndly, the 2 fund managers are not 'idiots' - Do you think they are going to part with 200m cash, just to see their money going down the drain ? Just some random analysis. Not a call to buy/sell/hold or short. |
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metaphoricsymbol
Member |
18-Feb-2011 11:15
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Nomura cuts target price because there seems to be dilution now. But remember there is new cash at hand, If company can use this cash to takeover company or buy new products so that they can produce yield better - then, it is still gain Say a company has 1,000 shares valued at $1.20. The company makes $12 profit. Value of company is $1200.. Earning per share is 1.2 cents. Now company issue new shares of 200 to new investor at 90 cents per share. Company now has 1200 shares, the $12 profit must now bed divided by 1200 shares - earning per share is now cut from 1.2 cents per share to 1 cents per share. What's more now share price is 90 cents, so company valued at 90cents is now cut from $1200 to only$ 1080. There is indeed share dilution. But WAIT. This extra 200 shares of 90 cents each give the company extra $180 cash to make business. If with this $180, it can help bring in a profit of higer margin, so add $4 profit to company earnings. What happens?? Now profit is $16 and earnings per share is now 1.3 cents per share. And share price jump up because of better earnings. So last time share price at $1.20 gives earning of 1.2 cents, now earnings is 1.3 cents shares must be worth more than the $1.20, share price jump to say $1.30 cents. Profit and earnings per share has increased. Value of company at 1.3x1200 share has also increased from 1200, now to $1560. This becomes a value added proposition. The issue is can that extra cash helps generate more profit and better earnings. The directors think so... that is why the deal is accepted. In fact with so much cash at hand, it is now even possible to pay out dividend. |
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Laulan
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18-Feb-2011 11:08
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No ocmplain, lah. Very hard lah. You should know MAS, SGX etc are all " business minded" authorities. Priority for corporations in most " what have you" , have been deeply rooted in our environment. Sad case for small investors public. Always get sucked of their money.
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junction
Senior |
18-Feb-2011 11:00
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I can't agree with you more. Biosensors management is not taking care of investors. Certain parties who stand to benefit push the price down and then the management offer them a DISCOUNT somemore. MAS should investigate whether got kelong or not. This is not the first time Biosensors management cause the price of its shares to dive. At the next AGM investors should grill the management!
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iPunter
Supreme |
18-Feb-2011 10:54
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I will only buy if I can get it @.935...  |
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Laulan
Master |
18-Feb-2011 10:49
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$1.00 is the mean average for 200 days over the year, so if it closes below 1.00, then I suggest " chow" , else " liap si si" until better times..
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bishan22
Elite |
18-Feb-2011 10:44
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The drop is expected. Lucky not too deep. Just hold tight. Good luck. 
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krisluke
Supreme |
18-Feb-2011 10:30
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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 Capitals acquisition price. Fundamentally Nomura maintains at Buy, but lowers TP to $1.40 from $1.50. |
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iPunter
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18-Feb-2011 10:05
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And I personally still can't get over the fact of that melamine-added milk powder... Just have a tiny thought for all those poor children who drank that poisonous mix into their tiny human bodies... they are tiny human beings. Even ill-treating a goldfish can cause objection by some... 
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Laulan
Master |
18-Feb-2011 09:59
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This culture always inevitably ends in long term failure of prices to move up. I don't like the habit of placement or issuing new shares to partners. There is a stock market for people to buy shares and not to place them, I totally hate any listed company doing this as it is the very reason for share prices remaining downward bias for most companies.
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gbleng
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18-Feb-2011 09:43
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It goes round in circles, it will be the flavour of the month again, once investors see china having a soft landing.... but in any case let's hope the new partners can get the biomatrix approved soon...
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firecrest
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18-Feb-2011 09:38
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I think this placement of shares are more of a strategic partnership between Biosensor and China counterparts. There are looking more on the long term than daily fluctuation of share price. | ||||
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iPunter
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18-Feb-2011 09:37
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Yea, unfortunately China-based companies are lately not in vogue... Psychologically, many shiver inside on merely hearing the term 'china'..
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gbleng
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18-Feb-2011 09:33
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When all is said and done, BIG is now truly a China company..... | ||||
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Laulan
Master |
18-Feb-2011 09:23
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I look at the idea of issuing shares as the directors saying " wow, I need alot of money to further pump into the company, but I don't think I could pay back if I use a bank loan." This message is revealing or not, I often wonder. | ||||
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iPunter
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18-Feb-2011 09:17
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This is a killer stock in the last few days... Many players got whacked left and right by it until they are in a total daze... |
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Laulan
Master |
18-Feb-2011 09:14
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If newbies has been careful and heeded my words, they probably would sell off earlier at a good price or sold CFDs to make something. I am not into CFDs because I find it bothersome to put money as margin, that's why. Now with the bad news on further issue of shares, I will not enter this counter anymore even if they try to play up. This bad culture of Singapore listed companies constantly issuing shares suck our money away. Bad, real bad. Petition to SGX, if you can on this practice, if you like but I don't think they will listen. But no harm trying if you are in Sg market. |
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