Why Has Biosensors International Group Ltd Spiked By 38% in 30 Days?

Although we don’t believe in focusing too much on short-term market movements, we do like to keep an eye on changes as they might be an indication that some interesting developments may be happening with a company.

With Biosensors International Group Ltd (SGX: B20) seeing its shares spiking by 38% over the past 30 days, are there significant changes happening within? Let’s take a look.

Heart-stopping buy-backs

Biosensors is a medical device company which has China as its largest market. Although the company sells a wide range of products, it is most well-known for its drug-eluting stents (stents are medical devices used to treat patients with cardiovascular diseases).

A lot has been going on for the company of late. Early last year, it had a change in the composition of its Board of Directors and also appointed a new Chief Operating Officer. Then, in September, a new Chief Executive Officer, Jose Calle Gordo, was brought in to replace Dr. Jack Wang. Wang had assumed the role of Biosensors’ Chief Technology Officer after stepping down as CEO, but had just announced his retirement last week.

As if changes in leadership wasn’t enough, Biosensors was also the target of a possible takeover in 2014. It was revealed in February that CITIC Private Equity Funds Management Co. Ltd, a shareholder of Biosensors, had considered taking the medical device maker private. But in August, Biosensors announced that CITIC would not be proceeding with any privatization offer.

Biosensors’ business performance has not been well of late. Revenue had fallen from US$336 million in FY2013 (financial year ended 31 March 2013) to US$319 million for the 12 months ended 30 September 2014. Meanwhile, the company’s profit got slashed from U$116 million to US$32 million over the same period.

Shares of the company more or less tagged along with the corporate results – Biosensors’ share price had declined from S$0.835 at the start of 2014 to S$0.675 today.

In November, Biosensors had started aggressively buying back its shares and the purchases continued on throughout December and into 2015. All told, the company has bought back a total of 20.9 million shares since its daily share buy-back mandate had started in July 2014.

Foolish Summary

Biosensors has a new management team in place and has been buying back its shares recently. These might be positives for investors as new leadership signals a fresh start while share buybacks may be a sign that the company thinks that its own shares are undervalued.

But that said, there is no indication as yet of any major operational revamp by management and there are no signs yet that the company can turn its earnings performance around. In order for the firm’s recent price rally to be sustainable, management needs to address Biosensor’s operational challenges and that is something for investors to keep an eye on.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.