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Equity Bottom-Up

Fisher & Paykel Healthcare Corp / Equity Bottom-Up

Fisher &amp; Paykel's first-half fiscal 2017 result was slightly below our expectations due largely to higher sales and marketing expenses as a percentage of group revenue. As well, R&amp;D as a percentage of group revenue was marginally higher than anticipated. Interim net profit after tax, or NPAT, of NZD 78.2 million was up 26% on the previous corresponding period, or pcp. An interim dividend of NZD 8.25 cents per share was declared, representing a payout ratio of 60%.We revise our assumptions to reflect higher spending on sales and marketing, and R&amp;D. As result, we trim our fiscal 2017 forecast NPAT by 9% to NZD 170 million. Our NZD 10 per share fair value estimate (AUD 9.50, based on an Australian dollar/New Zealand dollar exchange rate of 1.04) for Fisher &amp; Paykel remains intact. We regard the company as undervalued with shares currently trading at a 13% discount to our intrinsic assessment.Analyst: Chris Kallos, CFA

Fisher &amp; Paykel's first-half fiscal 2017 result was slightly below our expectations due largely to higher sales and marketing expenses as a percentage of group revenue. As well, R&amp;D as a percentage of group revenue was marginally higher than anticipated. Interim net profit after tax, or NPAT, of NZD 78.2 million was up 26% on the previous corresponding period, or pcp. An interim dividend of NZD 8.25 cents per share was declared, representing a payout ratio of 60%.We revise our assumptions to reflect higher spending on sales and marketing, and R&amp;D. As result, we trim our fiscal 2017 forecast NPAT by 9% to NZD 170 million. Our NZD 10 per share fair value estimate (AUD 9.50, based on an Australian dollar/New Zealand dollar exchange rate of 1.04) for Fisher &amp; Paykel remains intact. We regard the company as undervalued with shares currently trading at a 13% discount to our intrinsic assessment.Analyst: Chris Kallos, CFA

Fisher & Paykel Healthcare's Healthy Hospital Sales Offset Dip in Mask Sale Momentum

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

<ul><li>In this post, Evidente extends its systematic model of earnings certainty to Australian small caps.  The out-performance from large caps with high earnings certainty evident in 2015 was also present amongst small cap stocks.  The top 10 ranked small industrials earnings certainty stocks delivered an annual return of around 8%, well above the stocks with the lowest earnings certainty (-2%).</li><li>The REIT sector dominates the updated top 10 earnings certainty stocks.  The fact that most small cap REITs are trading a significant premiums to book value precisely at a time when commercial rental yields continue to deteriorate suggests that pricing around the sector is becoming increasingly complacent.  I stop short of recommending an outright short position in the sector due to the prospect that commercial rental yields could remain lower for longer thanks to low interest rates and ample liquidity globally.</li><li>I recommend overweight bets in the remaining four top ranked stocks that are not exposed to commercial property: Auckland International Airport, Fisher &amp; Paykel, Sky City Entertainment Group and Brickworks.  These four stocks rank in the top quartile across Evidente's market sentiment signals, which incorporate price momentum and acceleration measures.</li></ul>

In this post, Evidente extends its systematic model of earnings certainty to Australian small caps.  The out-performance from large caps with high earnings certainty evident in 2015 was also present amongst small cap stocks.  The top 10 ranked small industrials earnings certainty stocks delivered an annual return of around 8%, well above the stocks with the lowest earnings certainty (-2%).The REIT sector dominates the updated top 10 earnings certainty stocks.  The fact that most small cap REITs are trading a significant premiums to book value precisely at a time when commercial rental yields continue to deteriorate suggests that pricing around the sector is becoming increasingly complacent.  I stop short of recommending an outright short position in the sector due to the prospect that commercial rental yields could remain lower for longer thanks to low interest rates and ample liquidity globally.I recommend overweight bets in the remaining four top ranked stocks that are not exposed to commercial property: Auckland International Airport, Fisher &amp; Paykel, Sky City Entertainment Group and Brickworks.  These four stocks rank in the top quartile across Evidente's market sentiment signals, which incorporate price momentum and acceleration measures.

Beware Complacency Around Australian Small Cap REITs Risk Exposures

New Zealand

Fisher & Paykel Healthcare Corporation Limited designs, manufactures and markets heated humidification products and systems for use in respiratory care and the treatment of sleep apnea.  The Company also offers patient warming and neonatal care products, including warming products and infant resuscitators.

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Fisher & Paykel Healthcare Cor (FPH AU)

Fisher & Paykel Healthcare's Healthy Hospital Sales Offset Dip in Mask Sale Momentum

Fisher & Paykel's first-half fiscal 2017 result was slightly below our expectations due largely to higher sales and marketing expenses as a...

Morningstar, Inc.

Beware Complacency Around Australian Small Cap REITs Risk Exposures

In this post, Evidente extends its systematic model of earnings certainty to Australian small caps. The out-performance from large caps with high...

Sam Ferraro

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