BUY S$1.125 STI : 2,528.71
Upgrade from Hold
Price Target : 12-Month S$ 1.71 (Prev S$ 1.40)
Reason for Report : Company update
Potential Catalyst: Product approval in China
DBSV vs Consensus: Higher on more optimistic licensing revenue
• Acquisition of an additional 50% in JWMS is positive for earnings
• Expect licensing revenue to be strong
• FY12/13F earnings raised by 56%/34%
• China catalyst still to come. Upgrade to Buy, TP raised to S$1.71
Positive on BIG’s prospects. BIG has completed the acquisition of the remaining 50% stake in joint venture company, JWMS. We believe its outlook will be rosier on the back of : (i) higher earnings contribution from JWMS; (ii) sustained strong licensing revenue from Terumo; and (iii) longer term catalysts from the approval of BioMatrix Flex for the China market.
50% acquisition of JWMS is a plus. BIG now gets to consolidate JWMS’ financials. BIG is also now well positioned to take advantage in the event BioMatrix Flex is approved for sale in China.
Robust growth from licensing revenue. We remain optimistic on the licensing sales from Terumo in Japan and expect licensing sales growth of close to five times to over US$80m in FY12F. We believe further growth opportunities exist as Terumo is still only in its initial stages of marketing the NOBORI stent in Japan.
Catalyst still to come. BioMatrix Flex’s approval for sale in China will be a longer term catalyst for BIG. Hypothetically, a 5% market share could add another 8% to FY12F’s revenue of US$312m.
Upgrade to Buy, SOTP-based TP S$1.71. We have raised FY12/13F earnings by 56%/34% after taking into account consolidation of JWMS and strong licensing revenue outlook. We SOTP valuation of BIG at S$1.71 translates to 16x forward earnings, equivalent to peers and -0.5 standard deviation PE. Upgrade to Buy with 52% potential upside.
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