By Kelly Chia
Thu, 12 Feb 2009, 10:15:59 SGT

Summary: Biosensors International Group (Biosensors) reported another “home run” quarter with its 3Q09 revenue rising 135% YoY to US$20.6m while gross profit soared 233% YoY to US$13.6m. On a 9M basis, gross profit grew 3.5x to US$74.3m. The impressive performance was primarily due to accelerated sales of its Drug Eluting Stents along with better cost controls. The company indicated that with its cash balance of US$63.7m, it will be able to internally service its US$45m Convertible Notes (plus interest) due in Nov 2009. Management also updated on plans to launch its BioMatrix stent in China, with regulatory approval expected within 12 months. We think that Biosensors is now in a position to grow to the next phase when it can compete with global players. We tweak our financials and introduce our FY11F estimates with new management guidance on FY10F performance, better clarity on projections in China, cost estimates and product sales acceleration. We are maintaining our medtech discounted model with a raised fair value of S$0.71 (prev: S$0.66). Maintain BUY. (Kelly Chia)

Another home run. Biosensors International Group (Biosensors) reported another “home run” quarter with its 3Q09 revenue rising 135% YoY to US$20.6m while gross profit soared 233% YoY to US$13.6m. On a 9M basis, gross profit grew 3.5x to US$74.3m. The impressive performance was primarily due to sustained growth in sales of its higher margined Drug Eluting Stents (DES). Kudos also goes to management for keeping expenses under a tight lid as it only rose 20% YoY for 9M, paltry in view of sales growth. Biosensors reported a US$200k profit before tax for 3Q09 signalling a possible faster turnaround into the black the next quarter instead of 1Q10.

Funding needs satisfied. Biosensors has US$45m convertible notes (plus unpaid accrued interest at 3.95%) that are payable in Nov 2009. This quarter finally experienced the tangible benefits of the previous quarters of restructuring and Biosensors reported operating cash flows that were almost positive, enviable for a young medtech company. Along with its current cash balance of US$63.7m, Biosensors is confident of servicing the notes internally.

China. Management emphasised the importance of the China market. Biosensors has filed for regulatory clearance for the BioMatrix DES in China and expects approval within 12 months. It will leverage on its 50%-owned JWMS’ established sales network to accentuate its sales growth. We doubt that manufacturing of the BioMatrix stent will occur in China in view of IP copycat issues and have factored more aggressive utilisation of its current Singapore facility for FY11F.

Bringing it to the next phase. Fatigued investors that were previously continually droned only by the company’s cutting edge technologies but failed to see financial performance should perk up in view of Biosensor’s current finesse in execution. We think the present management and corporate framework will bring the company to the next phase when it can contend with the global players. DES sales should continue growing as we believe that stenting is a viable and cheaper alternative to open heart surgery, especially in today’s difficult economic environment.

New estimates, Maintain BUY. We tweak our financials and introduce our FY11F estimates with new management guidance on FY10F performance, better clarity on projections in China, cost estimates and product sales acceleration. We are maintaining our medtech discounted model with a raised fair value of S$0.71 (prev: S$0.66). Maintain BUY.