NEW ISSUE REVIEW : BIOSENSORS 4Y (5.25%) 4.875%

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It is hard to fault this company with the exception of its operating environment and the global slowdown expected in the DES (Drug Eluting Stent) business as technology changes allow for better screening of patient requirements. DES revenue lowest globally since 2007.

I wonder how Temasek missed this one because I see Norges Bank (Central bank of Norway) as a 5% shareholder. Everything about it looks as good as it could be for a bond investor. Good cashflows, low leverage, decent earnings, which makes me wonder why they are paying so much ? Probably virgin issue premium.

Basic Info

– Market Cap SGD 2.09 bio
– 43% EBITDA margin
– focused on developing, manufacturing and marketing DES , which is a base-metal stent (“BMS”) coated with a drug.
– main competitors : Boston Scientific(Baa3/BBB- Mkt Cap USD 8 bio), Johnson& Johnson(Aaa/AAA Mkt Cap USD 200 bio), Medtronic(A1/A+ Mkt Cap USD 44 bio), Abbott (A1/A+ Mkt Cap USD 52 bio).
– main shareholders :
1. WeiGao International – subsidiary of Shandong Weigao (listed in HK) 21.63%
2. Autumn Eagle Ltd – subsidiary of Hony Capital, private equity 15.74%
3. FMR LLC 10.49%
4. Atlantis Capital Holdings 7.62%
5. Norges Bank 5.07%

Best comparable in SGD would be Hyflux which is giving 4.2% for their 2019 paper and 4.25% for the retail perpetual bond traded on the stock exchange. Their industries are different and Hyflux is a smaller company too (Mkt Cap SGD 1 bio).

At 5.25%, it is paying us 4.5% over our 4Y interest rate which is 0.75%.

Verdict : Easy buy, risk of industry downturn buffered into price. My personal coupon tolerance would be 4.75%. Books are over SGD 1 bio now.

Disclaimer : I have no intention of buying Biosensors stock or bond in the next 6 months and do not hold any positions currently.

FINALLY ISSUED SGD 300 MIO AT 4.875%. BOOKS IN EXCESS OF SGD 1.7BIO.

 

Category : Market, Op-Eds