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Biosensors International (BUY; Target Price: S$1.88)

Biosensors International Group (BIG) reported its 4QFY12 results with YoY revenue growth of 98.2 per cent to US$88.2 million. PATMI jumped 49.4 per cent YoY to US$27.2 million. Adjusting for exceptional items, core PATMI would have surged 71.5 per cent YoY to US$28.6 million. For FY12, revenue increased 86.6 per cent to US$292.1 million, or 0.3 per cent above our forecast. This was boosted by continued robust growth in its BioMatrix™ family of drug-eluting stents (DES) and licensing revenue, as well as consolidation of JW Medical Systems (JWMS) from 3QFY12. Core PATMI grew 92.0 per cent to US$101.0 million and formed 98.6 per cent of our FY12 estimates. BIG highlighted that it experienced good growth in the EMEA and APAC regions, and expects its growth trajectory in these regions to continue. Nevertheless, BIG remains cautious on the impact of DES price reductions in several locations, especially in China and Japan. As the full impact of price cuts has yet to be realised, we expect some pressure on its gross margins moving forward. BIG guided that it expects sales growth in the range of 20-30 per cent for FY13. This would be driven largely by its DES products as it expects licensing revenue contribution to moderate. We note that the upper end of BIG’s guidance still came in 2.8 per cent below consensus’ estimates. We pare our FY13 revenue forecast by 4.2 per cent and our PATMI estimates by 10.2 per cent. The larger bottomline impact is because we have also factored in non-operating and non-cash amortisation costs of US$16 million per annum relating to BIG’s acquisition of JWMS. – OCBC Investment Research


Hisaka Holdings (NEUTRAL; Target Price: S$0.48)

1H12 net loss of S$0.1 million was below our net profit S$1.2 million expectation due mainly to S$0.3 million forex loss and S$0.7 million impairment loss on inventories. Excluding these, EBITDA was 9 per cent above our expectation due to better-than-expected GPM. Hisaka has entered into an MOU to acquire Xinghai. The aggregate consideration of S$192.5 million will be satisfied by the issue of 401 million new shares, issue price of S$0.48 for each consideration share. Xinghai is incorporated in China, and is a subsidiary of Sky Petrol (listed in SGX). Xinghai is engaged in the business of transporting petroleum products for petro-chemical companies through its fleet of seven oil products tankers. As the semiconductor sector remains volatile and challenging, the group believes the acquisition represents a good opportunity to expand and diversify its business and operation, allowing it to achieve a more consistent and sustainable financial growth. Hisaka generated a negative free cash flow of S$5.7 million in FY1H09/12 after increasing its working capital requirement. As a result, net cash dropped from S$28 million at end FY09/2011 to S$21 million. – NRA Capital


Olam International (HOLD; Target Price: S$1.86)

Olam International Limited plans to spend US$240 million for its first sugar milling asset in Brazil; this by acquiring Usina Acucareira Passos (UAP) for US$129 million and investing an additionalUS$111.5 million capex over the next five years to improve its agricultural and industrial capacity and efficiency. Olam intends to fund the move using internal accruals and borrowings. Olam expects the investment to deliver EBITDA margin of over 30 per cent by steady state (FY16) and generate equity IRR of over 20 per cent. UAP owns/operates a sugar mill in Passos with an annual crushing capacity of 1.75 million MT and an output capacity of up to 200,000 MT of sugar per year. Management believes the latest acquisition is integral to executing its sugar strategy of building a configuration of milling assets in large sugar-producing countries that have a comparative cost advantage. Recall that Olam had previously made several investments in sugar, including two mills in India and two refineries (one in Indonesia and one upcoming in Nigeria). For now, management does not expect any immediate impact on its financials; hence we are leaving our FY12 and FY13 forecasts unchanged. Meanwhile, management also revealed that it expects the sugar surplus to persist going into 4QCY12, which should cause sugar prices to continue falling. However, it remains confident that prices should bottom after that and not affect the profitability of UAP when it reaches steady state in FY16. Growing uncertainty in Europe may continue to see increased volatility in commodity stocks and we do not expect Olam to be spared, although it does operate mostly in the more demand-resilient soft commodities space. Ascribing a lower 12.5x multiple to its blended FY12/13 EPS, our fair value eases from S$2.24 to S$1.86. – OCBC Investment Research


Tat Hong Holdings (Not Rated)

Tat Hong reported a better-than-expected FY3/12 results on Monday. All its business segments have recorded improvements in the recent quarters, suggesting that the impact of the global financial crisis has worn off and it is poised to emerge from the trough. With infrastructure demand in Australia, ASEAN and China likely to remain buoyant for the next three years, Tat Hong should be able to sustain its growth momentum. Improvements to Tat Hong’s operating statistics, i.e., fleet size, utilisation and rental rates, have been evident in recent quarters. For example, its crawler crane utilisation rate has recovered to 70 per cent in FY3/12 from only 56 per cent in FY3/10. We believe that this was driven by the infrastructure boom across ASEAN and China, as well as the demand from recovery construction in Australia. The trend looks set to continue for the next 2-3 years. Tat Hong’s China business has been lagging the rest of the group due to local shareholder issues. But this has largely been resolved after the problematic China JV was forced to sell its assets to another of Tat Hong’s China JV over which it has better control. This restructuring should augur well for a turnaround in the China business. Tat Hong’s FY3/12 net profit of S$42 million is still less than half its peak of S$90 million achieved in FY3/08. But given its stable improvement so far (net profit has rebounded from S$3.8 million in 1QFY3/11 to S$11.2 million in 1QFY3/12), it probably would not be too long before its earnings peak again. – Maybank Kim Eng Research