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By James Cooke | Published Feb 25, 2013

Biomedical group looks to be undervalued

Biosensors, the Singaporean medical devices company, is a pioneer in the design of innovative stents - the small tube-like mesh structures used to treat narrow or weak arteries.

The company markets and distributes its products throughout Asia, where demographic and dietary trends suggest that demand will remain buoyant for many years.

Biomatrix, Biosensors’ core product, is made with a biodegradable polymer that slowly releases a proprietary drug into the patient’s body. A recent five-year clinical study proved its superiority over competing technologies. In spite of this, the company currently sets prices at a similar level to peers, prioritising the volume benefits which arise from increasing market share.

We expect this positive dynamic to continue in the short to mid-term. In addition, the company continues to invest in new product development. Biofreedom, a polymer-free product, has recently been approved for use in Europe.

Trading on a prospective free cashflow yield of 8 per cent and offering above-average growth prospects, we believe that Biosensors’ stock is undervalued. On an EV/EBITDA basis, the company trades at 9.3x versus its global cardiovascular device peers on an average of 10.4x.

The company would make an attractive acquisition for one of the many cash-rich US healthcare companies that are looking to deploy their cash piles.

James Cooke is deputy manager of the SVM World Equity fund

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