Here's a brief summary of the reasons for purchasing Biosensors:
- High growth potential
- Licensing agreement with Terumo Corporation extended till Dec 2014
- Potential M&A target
- Impending SFDA approval on Biosenors' flagship product, BioMatrix (end of 2012?)
- Shandong Weigao taking on a more active role in its capacity as Biosensors' majority shareholder
- First mover advantage and strong positive clinical data as its key competitive advantage
- Strong technical support at $1.20
- Potential price cuts of drug-eluting stents in China and Japan might have been priced in already. Furthermore, volume growth could mitigate price decline
- Acquisition of JWMS, one of the top three Drug Eluting Stent(DES) players in China with a strong distribution network nationwide with around 25% share in the domestic medical equipment market
- Analysts' top pick in the healthcare sector
- Relatively low gearing, high ROIC and earnings growth(>20%) and attractive multiples such as P/E, P/B, P/CF, etc
Here are my concerns about the purchase:
- Biosensors is a non-dividend paying stock
- Uncertainty in global economy - Middle East Tensions, Europe crisis and China's slowdown
- Magnitude of price reduction in China still unknown
- Long-overdue SFDA approval on Biosensors' flagship product, BioMatrix
- High competitive rivalry from bigger players in the DES market (Boston Scientific, Medtronic, etc)
Based on past experience, I became aware of the fact that I will never be able to catch the bottom when purchasing stocks and prices almost certainly go below my purchase price after I bought it. Since Biosensors' stock price has retraced back to its strong support line of $1.20, I decided to test it out by purchasing 3 lots.
Although this stock does not meet my selection criteria of being a stable or dividend paying blue chip, I feel that its potential growth is worth a bet. The good track record of the company, coupled with an experienced management team that is capable of achieving targets for Biosensors and its investors, prove that Biosensors has the ability to carry out future growth plans. Personally, I feel that this stock is worth a look for long term investors who are interested in a growing industry.
It is indeed difficult to keep emotions out of the picture. I am keeping my fingers crossed.