Biosensors International BIG SP

By Nomura Singapore Limited

COMPANY QUICK COMMENT


According to Bloomberg, Microport Scientific, the leader in the Chinese drug-eluting stent market, is raising about US$150mn via a Hong Kong IPO this month (Bloomberg, 1 Sep 2010). If Weigao's current valuation of 35x FY11 P/E is any guide for Microport's, we believe a successful IPO by Microport could be a re-rating catalyst for Biosensors, which owns 50% of JWMS - the last remaining private stent maker in China with a significant market share. Reiterate BUY -- we'll provide further industry analysis on Microport's prospectus pending its release.
 
Peer listing to drive rerating?


Market leader with first mover's advantage. Microport is the market leader in drug-eluting stents (DES) in China with a c30% market share (vs. 20~25% for Lepu and JWMS). Its DES Firebird was the first local DES to be launched in China (in May 2004). While we believe its technology is not groundbreaking (sirolimus-eluting stent similar to Johnson & Johnson's Cypher), Firebird has maintained its market-leading status over the years due to its first mover advantage, albeit with a declining market share. It has recently launched a clinical trial for a next-generation DES FIREHAWK which has a biodegradable polymer. (for more details, see our initiation report Moving past the inflexion point, 16 Oct 2009)

Re-rating of Biosensors? One part of the investor feedback we have received on BIG is the lack of a trading comparable (ie, a single-product cardiovascular device company listed in Asia, excluding A-shares). Therefore we believe Microport's H-shares listing augers well for BIG as investors potentially become more knowledgeable on the industry. If Weigao's current valuation of 35x FY11F P/E is any guide for Microport's listing, we believe a successful IPO by Microport could be a re-rating catalyst for Biosensors, which owns 50% of JWMS. Our PT of $1.20 values JWMS at 22x FY10F P/E.