The first of more acquisitions to come. Biosensors is acquiring substantially all the assets of Spectrum Dynamics (SD) for cash consideration of USD51.13m (plus further payments based on undisclosed performance benchmarks), which translates into 7x P/B based on the book value of the assets of USD7.3m as at Mar 2013. This marks the first of more acquisitions to come as Biosensors seeks to expand its product offerings. No significant earnings contribution is expected from SD for FY3/14F although Biosensors cites the potential for ‘moderately accretive’ earnings contribution in FY3/15F. Maintain Hold and SOTP-based TP of SGD1.28.

Acquiring a revolutionary technology. SD is a privately-held company in Israel, whose key business is in medical imaging systems. It has developed a revolutionary technology which provides high-speed and high resolution 3D images to aid physicians in determining the appropriate treatment for patients. Its flagship product is the DSPECTTM Cardiac Imaging System, which utilises nuclear imaging technology to provide sharper diagnostic images of the heart and measures heart muscle blood flows.

What kind of synergies? The acquisition could add a potential new growth driver for Biosensors and is congruent with its strategy to expand its range of medical equipment product offerings. Biosensors would tap its sales channel to aid in accelerating the sales of DSPECTTM. Its relationships with interventional cardiologists could also help to speed up adoption of the technology. In addition Biosensors has the financial power to expand the manufacturing capacity for this product.

No near-term boost from acquisition, maintain Hold. Given that there would not be any near-term contributions from this acquisition, we believe that the market reaction would be neutral. Growth expectations would need to be tempered with execution risks in the initial stages. We have not accounted for any potential contributions in our forecasts and valuations. Biosensors would utilise only USD51m of its net cash position of >USD500m for this acquisition. We expect more M&As and are wary of the risks that entail such activities. Maintain Hold.

Source: Maybank Kim Eng Research - 15 May 2013