Four-year low: Biosensors profits drop 18.4%

Despite revenues up by 4.6%.

Biosensors International Group (BIG) has been seeing tough times and will probably continue to face challenges as its fundamentals remain weak in the near-term. Market conditions are expected to remain challenging due to intense competition and price erosion in the global DES market.

In a report, OCBC revealed that BIG reported another set of insipid results, with 1Q15 core profits sliding 18.4% to US$9.9 million despite a 4.6% increase in revenue to US$80.2 million. The former was BIG’s weakest performance since 4Q10.

There are some positives, OCBC says, with BIG reaping double-digit volume growth for both its BioMatrix family of drug-eluting stents (DES) and Excel stent.

Management is seeking to to further expand its next-generation BioFreedom drug coated stent rollout, having just enrolled patients for clinical trials in Japan in June this year with plans to start clinical trials in the U.S. within the next two months.

Here’s more from OCBC:

The ongoing transition in Japan from its reliance on licensing and royalty income to a direct sales modus operandi will also take time to see stronger contribution, in our opinion.

BIG‟s share price has retreated 10.3% since we last downgraded our rating to a “Sell” on 13 Nov 2013, a stark contrast to the STI‟s 4.4% advance during the same period. However, as fundamentals of BIG remain weak in the near-term, in our view, we believe there may be more downside potential ahead. We slash our FY15 and FY16 PATMI projections by 20.5% and 18.1%, respectively, on lower margin assumptions. Our fair value estimate consequently drops from S$0.85 to S$0.68, still pegged to 20x FY15F EPS.