Nomura estimates.
Biosensors International (80 c): Buy, target price $1.23
Nomura Singapore analysts: Lim Jit Soon, CFA, and Tsai Yuan Yiu
1. Strong momentum in existing and new DES markets
3Q10 Drug Eluting Stent (DES) revenue growth of 28% q-q was driven by existing markets and new approvals in Hong Kong and Korea. Given that both new markets are relatively small, we believe the strong growth mainly underscores the momentum in existing markets, which is a testimony to BioMatrix’s leading-edge technology. In 4Q10, we expect a further boost from BioMatrix’s launch in France in January.
2. JWMS — growth reaffirms strong industry dynamics
JWMS’ operational performance remains robust with 50% y-y revenue growth despite Abbott’s launch of XIENCE V in China during the quarter. We lift our JWMS forecast by 25-34% over FY10-12F, in line with the forecasts of our Weigao (8199 HK, BUY) analyst Yankun Hou.
3. Steady base business, Nobori sales picking up.
We highlight the steady growth of its base business that sells catheters to JWMS. Nobori sales appear to be picking up, withTerumo royalties up 19% q-q, albeit from a low base. We adjust ourNPV estimates by +34% for its base business and –10% for Terumo royalties on revised revenue forecasts.
4. FY11 revenue guidance of US$135-145mn
Management unveiled its FY11F revenue (ex-royalty) guidance ofUS$135-145mn, suggesting about 30% top-line growth. Our revenue forecast of US$146mn (ex-royalty) is at the high-end of the range.
5. Attractive valuations — revised PT of S$1.23
Excluding its 50% stake in JWMS (US$468mn on our estimates), Biosensors is trading at 8x FY11F core P/E, 1.3x FY11F price/sales, which we believe implies that the stock is undervalued. We reiterate BUY with a revised Price Target of S$1.23.
| Price (local) | Market cap US$m | Core PE (x) | 3-yr EPS CAGR | P/BV CY10 | ROE (%) CY10 | Div yield (%) CY 10 | ||
| CY 10 CY11 | ||||||||
| DESIGN STUDIO | 0.61 | 109.4 | 4.7 | 4.1 | 44.7 | 1.8 | 43.0 | 6.4 |
| KINGSMEN CREATIVE | 0.56 | 79.1 | 6.9 | 6.8 | 4.6 | 1.9 | 28.3 | 5.2 |
| DEPA | 0.53 | 332.2 | 4.6 | 4.4 | 6.0 | 0.7 | 12.8 | 5.7 |
| PICO FAR EAST | 1.41 | 217.3 | 9.4 | 8.0 | 10.0 | 1.7 | 18.7 | 6.4 |
| Simple average (ex-Design Studio) | 6.8 | 6.4 | 5.5 | 1.4 | 19.9 | 5.8 | ||
Design Studio (61c): Trading at 4.1x 2011 earnings
CIMB-GK analyst: Germaine Khong
Poised for growth. Design Studio is one of Singapore’s leading customised furniture manufacturers and interior fit-out specialists. We believe this stock would be re-rated further as a beneficiary of Singapore’s growing population and influx of tourists when its two integrated resorts start full operations.
Bernard Lim, CEO, Design Studio
• Pipeline of residential property projects. Design Studio has secured contracts for key residential developments. Given that it is a market leader in customised furniture manufacturing, it would be well positioned to tap a pipeline of more than30k residential units which are slated for completion by 2012.
• Hospitality industry boom benefits interior fit-out specialists. In Singapore, we anticipate that tourist arrivals will surpass 10m comfortably by 2010. To meet the demand, 11k new hotel rooms have been slated for completion by 2012. Existing hotels may also refurbish hotel rooms, given intensifying competition in the market.
• Attractive valuations. Design Studio is trading at 4.1x CY11 consensus earnings vs. the 6.4x average for its peers. We believe it should be trading closer to its peers. Furthermore, forecast dividend yields (consensus) are attractive at 5-8%.
Recent story: DESIGN STUDIO attracts Prudential Asset Management as shareholder
Forum thread on Biosensors here
