iosensors International (SGX: B20) is a medical device company. It specialises in developing and manufacturing technologies for use in treating heart disease. The company’s leading product is a drug-eluting stent that it obtained the right to sell in Europe in 2008.
The company will reach its 10th anniversary on the Singapore Exchange this May. Since its listing, it has seen fluctuating bottom-line profits, though top-line revenues have been steadily rising.
So what would a value investor such as Benjamin Graham make of the company?
With earnings down from recent highs, value hunters could be hoping to see a significant turnaround. However at the current share of S$0.66, Biosensors is valued at over 30 times earnings. This translates into an earnings yield of 3.1%. By comparison, the risk-free rate of return is currently around 2%. A value investor would probably want to see an earnings yield of at least twice the risk-free return.
A big draw of Biosensors International is its sizeable pile of current assets. Presently the net current asset value of S$953m accounts for over 80% of the company’s market value. This translates to a current ratio of 6, which is some three times higher than the value of 2 that Graham’s followers would like to see.
Looking ahead, Biosensors wants to optimise operating profit, while strengthening its position in the cardiovascular market. It also wants to expand its geographic reach. Alongside this, the company plans to add new product lines.
If these objectives are reached, Biosensors could be a good investment. However at present it would seem to have the prospects of a prospective growth share rather than a solid value investment.
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