TP: $1.30Jinsong Du / Research Analyst / 852 2101 6589 / jinsong.du@credit-suisse.com Justin Liu / Research Analyst / 852 2101 7350 / justin.liu@credit-suisse.com

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at the back of breaking news. Biosensors, a Singapore-based

stent maker, announced yesterday that it would buy the remaining

50% ownership of JW Medical (not listed), a Chinese stent maker.We initiate coverage on Biosensors with an OUTPERFORM rating

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transaction valued JW Medical at 13x FY08E P/E, which is a 56%

discount to the average of overseas listed Chinese medical

devices companies?. We forecast JW Medical?s earnings to growth

at a CAGR of 40% from 2007-09.Based on our estimates of JW Medical?s FY08E net income, the

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MARK approval for BioMatrix by the end of January 2008. If and

when the approval is granted, the share price should react

positively. Biosensors? potential consolidation of the Asian stent

market should serve as a longer-term catalyst, in our view.Biosensors announced on 26 December 2007 that it expects CE

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upside. We are positive on the story but do acknowledge the high

uncertainty of earnings and execution risks. Thus we advise

investors to exercise caution.Our DCF-based fair value of S$1.30 suggests 35% potential

Reasonable price paid for JW Medical and immediate boost to earnings

We estimated China?s stent market to be around US$300 mn and JW

Medical to have around 20% of the market share.

Biosensors has entered into an agreement with Shandong Weigao

(8199.HK, HK$16.80, Outperform, TP $19.00) to acquire 30% equity

interests of JW Medical for 120 mn new Biosensors shares. It will also

grant Weigao a put option to sell the remaining 20% equity interests of

JW Medical for 40 mn of new Biosensors hares.

Including an earlier 129 mn new ordinary Biosensors shares + US$10

mn in cash for the first 50% equity interest in JW Medical, the total

consideration for 100% acquisition of JW Medical involves 289 mn

new ordinary Biosensors shares and US$10 mn in cash. Thus the

total valuation of JW Medical is approximately US$180 mn.

Based on our estimates of JW Medical?s FY08E net income, the

transaction valued JW Medical at 13x FY08E P/E, which is a 56%

discount to the average of overseas listed Chinese medical devices

companies?. We forecast JW Medical?s earnings to growth at a CAGR

of 40% in 2007-09.

We suspect Shandong Weigao sold out due to the

partnership with Medtronic

Shandong Weigao recently formed a partnership with Medtronic (MDT,

$49.40, Neutral, TP $52.00), which also has a stent business. We

believe this could be one of the key reasons for Shandong Weigao to

sell out its stake in JW Medical. We also draw comfort from the fact

that Shandong Weigao agreed to settle the transaction in Biosensors

shares instead of cash, which we believe shows confidence in

Biosensors? future.

Asian stent market has the highest growth among all

regions

According to Millennium Research Group, the Asian stent market is

around US$700 mn, and is expected to grow at a CAGR exceeding

15% CAGR in the next three years, the highest growth among all

regions.

In recent months Biosensors accelerated its expansion effort in the

region. It set up an India operation, and acquired a stent distributor in

Indonesia, among other activities. We expect the company to continue

its expansion and potentially acquire key players in the region. With

the strategy to consolidate the industry and become a dominant Asian

stent maker, Biosensors should be well positioned to benefit from the

high growth potential in the Asian stent market.

DCF valuation with assumptions subject to significant

change

Based on a 3% terminal growth rate and a WACC of 10.50%, our

DCF-based fair value for Biosensors is S$1.30. We expect the

company to provide detailed financial guidance after it obtains the CE

MARK. Therefore, our current assumptions are subject to significant

changes.

Risks

Investment risks include timeline of CE MARK approval for BioMatrix,

changes in competitive landscape, regulatory changes, and safety

concerns, as well as execution of the BioMatrix launch.

Goldman Sachs sees US 'falling into recession'

http://sg.news.yahoo.com/afp/20080109/tts-us-economy-growth-recession-972e412.htmlthis

Trade with care.