FPH - Fisher Paykel Healthcare Corp

[Breezy]

Hey leftie

What you make of guidance single digit growth company trading at 60 times earnings

Nothing extreme, take a look at XRO if you want an extreme PE yet it seems to be trucking along nicely, you guys too focused on one metric, its all about potential and quality and this company has both in spades.

[Left Field]

Hey Winnie

I'm no guru like u but I suspect FPH's 'high P/E" is all about FPH's ability to provide a high margin on its steadily growing revenue base. I note this in today's commentary.....

" Gross margin for the year was 59.4%, a 369 basis point decrease in constant currency....."

"....Prior to the pandemic, we had a track record of incremental improvements in gross margin. During the last three years, our responsibility was to get as much product as possible into the hands of our customers. Now, as every team in our business turns back to efficiency gains, we are confident in our ability to return to our long-term target of 65% within three to four years.

[Breezy]

Hey Winnie

I'm no guru like u but I suspect FPH's 'high P/E" is all about FPH's ability to provide a high margin on its steadily growing revenue base. I note this in today's commentary.....

" Gross margin for the year was 59.4%, a 369 basis point decrease in constant currency....."

"....Prior to the pandemic, we had a track record of incremental improvements in gross margin. During the last three years, our responsibility was to get as much product as possible into the hands of our customers. Now, as every team in our business turns back to efficiency gains, we are confident in our ability to return to our long-term target of 65% within three to four years.

(ps see my post # 111...... PE over 50 has been with FPH ever since I've been trading))

This company ticks all the right boxes for me, sure its got a volatile sp as seen on open today but thats the nature of the beast with an international growth company.

[Left Field]

Winnie was asking about FPH's high PE

My new fancy Jardens trading site tells me FPH PE is 58.99 and compares this to peer COH.AU's PE at 61.30.

The same comparison with HLG by Jarden gives a PE of 10.58 and compared this to MHJ at 9.86, BST.AU at 7.75 and UNI.AU at 8.05.

[winner (n)]

Winnie was asking about FPH's high PE

My new fancy Jardens trading site tells me FPH PE is 58.99 and compares this to peer COH.AU's PE at 61.30.

The same comparison with HLG by Jarden gives a PE of 10.58 and compared this to MHJ at 9.86, BST.AU at 7.75 and UNI.AU at 8.05.

Ok then ....FPH must be fairly valued at the moment

Can't argue with the experts

And breezy still saying $50 in a few years time

[Basil]

$100 in 5 years time

[Breezy]

$100 in 5 years time

Nice and bullish and hey if XRO can do it then anythings possible.

[Shareguy]

Craig's said today

FPH – STOP PRESS – Downgrades to NPAT forecasts likely for FY24e ... FPH delivered FY23 NPAT of $250m, 2% below consensus with revenue not coming in at the top of the range as predicted in our recent research as demand softened late in the period, however the key is guidance which is very weak and c.13% below consensus. FPH made several key guidance statements: Revenue guidance of $1.7bn is in line with consensus/CIPe. Gross margin guidance is for 200bps ccy, but this translates to just 100bps YoY improvement at current fx rates. FPH expressed hope that gross margin will return to target in 3-4 years which is also broadly in line with consensus. The opex guidance was a genuine surprise, with FPH guiding for 12% NZ$ opex growth in FY24e (14% ccy) or $660m. We understand that this reflects that FPH has finally caught up on a number of new hires management had hoped to make earlier in FY23 (and one reason for the guidance upgrades in FY23). The surprise comes as FPH previously guided for operating costs to grow slower than revenue in coming years – clearly this will not be the case in FY24. Net interest expense is guided to $16m, well above consensus of $4m, as FPH's capex leaps to $450m, in large part due to the acquisition of the new campus in Drury, South Auckland (c.$300m). Putting all of that together our back of the envelope calculations suggests guidance is for c.$262m, up only slightly on pcp, and 13% below prior consensus of $300m. Note we may need to adjust our calculations based on tax rate guidance (not provided in the release). We also note the fx rates assumed in guidance are higher than spot, so we interpret the guidance at spot at closer to $265-270m (vs prior consensus $300m). FPH last at $25.65 but expect it to trade down sharply today on the softer bottom line guidance and elevated multiple

[Ferg]

I thought predictions were meant to be to 1 decimal place....?  Come on guys.....you are letting the side down. 

$100 in 5 years time

Future looks very bright to me, $50 in 4 yrs.

[Shareguy]

Latest from Craig's

FPH – Ridgewell & Morrison note that NZ respiratory equipment exports (mostly made up of FPH products) were up 21% YoY in June, making FPH's 1Q24 exports flat at -1% YoY. As a reminder, FY24 guidance was for revenue of $1.70bn or 8% growth YoY – closer to $1.73bn and 9% growth at current spot fx rates. At first read, therefore, the data is of concern. However, recent discussions with management suggest they remain confident in their ability to hit guidance. We note FPH's inventory grew significantly during covid as it shifted its inventory strategy from 'Just in Time' to 'Just in Case'. From 1H23 as the pandemic subsided, FPH began to reduce inventory levels, which decreased 8% HoH over 2H23 – and as such, Ridgewell & Morrison think the weak data mainly reflects that FPH has continued to work its way through excess inventories in 1Q24. If they are right, this should support an improved cashflow result for FPH in 1H24. In addition, we believe that any increase in FPH's total production is now likely to be coming out of Mexico (which is not reflected in the NZ export data), which should support gross margin improvement given lower labour costs in that market (particularly once FPH's excess inventory, much of which was made in NZ, is cleared).....FPH last at $24.08 (+6.5% YTD)

Craig's also added to Bakers dozen.

[Waltzing]

SG's postings almost need a power point presentation they are so thick with data points.

"$100 in 5 years time " from Mr B.

this is worth exploring and if correct it must constitute the most compelling investment on the NZX?

[Onemootpoint]

Craigs more upbeat this time. Always a good buy. Sometimes just a better buy than other times.

[Shareguy]

From Craig's today

Resmed announced its June quarter result today, with quarterly device/mask sales up 24%/18% YoY ccy, respectively, but traded down 7% pre-market as operating margin for the quarter fell from higher-than-expected SG&A and COGS. Device sales decelerated from 43% YoY as Resmed finally worked its way through the backlog of untreated patients which built up during covid.  In contrast, mask sales accelerated from 15% due to an improved supply of devices and pricing increases. Resmed pointed out that historic mask growth had been constrained due to a lack of new product releases (as engineering resources were focused on meeting device demand in the face of pandemic-induced supply constraints) and said they expected to release a new OSA mask product within the next year. Resmed's strong mask growth, driven by the backlog of untreated OSA patients being cleared, gives us further confidence in our expectations for +10% ccy growth in FPH's OSA consumable division in FY24. In-line with Resmed's expectations for a new mask release in the next year Stephen Ridgewell and Rob Morrison had previously expected FPH's OSA mask growth to decelerate to 5% in FY25 due to increased competition.

[Left Field]

From Craig's today

Resmed announced its June quarter result today, with quarterly device/mask sales up 24%/18% YoY ccy, respectively, but traded down 7% pre-market as operating margin for the quarter fell from higher-than-expected SG&A and COGS. Device sales decelerated from 43% YoY as Resmed finally worked its way through the backlog of untreated patients which built up during covid.  In contrast, mask sales accelerated from 15% due to an improved supply of devices and pricing increases. Resmed pointed out that historic mask growth had been constrained due to a lack of new product releases (as engineering resources were focused on meeting device demand in the face of pandemic-induced supply constraints) and said they expected to release a new OSA mask product within the next year. Resmed's strong mask growth, driven by the backlog of untreated OSA patients being cleared, gives us further confidence in our expectations for +10% ccy growth in FPH's OSA consumable division in FY24. In-line with Resmed's expectations for a new mask release in the next year Stephen Ridgewell and Rob Morrison had previously expected FPH's OSA mask growth to decelerate to 5% in FY25 due to increased competition.

Trust Craigs to find negativity in this news.  One would have thought much depends on price/quality/innovation etc of Resmed's  new mask... and then there is the "increased attention and awareness that can expand the total market" scenario, (that's why retailers group competing outlets together, it's why increased competition in the Chinese IF market grew the total market.... etc etc.)

[Shareguy]

•   FPH - FPH's key High Flow Nasal Oxygen (HFNO) competitor, Vapotherm, has reported 2Q23 (calendar year) results: downgrading CY23 guidance based on weaker than expected HFNO consumables utilisation and revenue. But, even with Vapotherm's less optimistic assumptions, 2H23 consumables revenue is expected to grow 24% YoY – this period corresponds to FPH's 2Q24 and 3Q24. Although this is higher than our FPH FY23E estimates for 17% YoY HFNO consumables growth, we think our prior expectations remain sensible given (i) FPH's higher exposure to ex-US geographies where demand trends are less clear and (ii) HFNO consumable demand has disappointed in CY23 so far. FPH closed down XXX% at $23.33 which appears attributable to the recent weakness in comp ResMed (-20% since the start of August)....