Biosensors International choked by 60.6% drop in profits
Another lacklustre quarter for the group.
According to OCBC Investment Research, Biosensors International Group (BIG) turned in another lacklustre set of results, with 2QFY14 core PATMI plunging 60.6% YoY to US$11.5m despite a 4.1% growth in revenue to US$83.0m.
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This was significantly below ours and the street’s expectations, as 1HFY14 core PATMI of US$23.6m (-59.0%) formed only 30.0% of our original FY14 estimates (27.4% of Bloomberg consensus).
1HFY14 revenue was down marginally by 3.8% to US$159.7m, or 43.0% of our full-year forecast. Disappointingly, there was also no sequential pickup after a poor 1QFY14 as core PATMI slipped 4.9% QoQ.
Revenue guidance lowered; in-line with our prior warning
Despite continued momentum in its core drug-eluting stent sales growth in the EMEA and APAC regions (including a strong recovery in China from 1QFY14), BIG lowered its FY14 revenue guidance, highlighting that it now expects only moderate growth in total revenue.
This can be attributed to ASP pressures and delays in royalty income improvement in Japan. While we had previously cautioned that management would have difficulty meeting its previous 15% topline growth guidance and that BIG was also facing mounting cost pressures, the situation appears to be worse than we had expected.
Management acknowledged that operating expenses as a percentage of product revenue was on the high side, but said that it was targeting to bring this figure down by enhancing its operational efficiencies and restructuring its cost compositions.