Price target: SGD 1.2

Peer listing to drive rerating? (II)

Microport IPO price likely to be at the high-end. Based on our channel checks, we understand that market response to Microport's IPO is good. At the high end of the indicated range (HK$4.60~HK$6.10), Microport's IPO valuation is at 25x FY10 P/E (Dec-end), according to the company. In contrast, Biosensors is trading at 18x FY11F P/E (Mar-end) on a strong FY12F EPS growth of 52% (12x FY12F P/E), driven by the impending approval of Nobori in Japan.

Similar product, but different geographical exposure. Both Microport and Biosensors are broadly single-product companies focused on drug-eluting stents. However, Microport is a pure China play while Biosensors has a more diversified growth profile with three pillars of growth: i) core franchise which is well-established in the EU, ii) China exposure via 50%-owned JV JWMS, iii) Japan exposure via licensing agreement with Terumo.

Recent CE approval reflects group's strategy to expand portfolio. BIG recently received CE approval for longer length versions of its flagship BioMatrix Flex, which offers a significant opportunity to increase market penetration as an estimated 15% of DES usage involve long lengths. We believe this reflects the group's strategy to expand its product offerings, exemplified by the recent acquisition of CardioMind.

Reiterate BUY - catalysts yet to play out. BIG has rerated on the news of Microport's IPO (+7% this morning). We believe the stock will continue to trend towards our PT of S$1.20, driven by catalysts such as BioFreedom's clinical trial results (to be announced next Tuesday at TCT conference) and the Japanese approval of Nobori by Terumo.

Valuation Methodology and Investment Risks:

Note: Ratings and Price Targets are as of the date of the most recently published report (http://www.nomura.com/research) rather than the date of this email. We value Biosensors on a SOTP methodology- DCF for is base business, Terumo royalties and BioMatrix (9.7% WACC), 9.2x exit P/E to account for DES business valuation. We value its 50% stake in JWMS at 22x P/E. Key risks: i) High exposure to weak EUR; ii) Stent pricing pressure in China.

Nomura Global Equity Research

Institutional Investor 2010 Ranking

#1 China Research, #1 Japan Research, #2 Asia Research, #2 Europe Res

Price (16 Sep 2010): SGD 0.84

Research analyst: Jit Soon Lim

65.6433.6969

jitsoon.lim@nomura.com

Research analyst: Yuan Yiu Tsai

65-6433-6964

yuanyiu.tsai@nomura.com

ublish Date: 17 Sep 2010

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