Cochlear a global leader in the design and production of hearing implants

Australian Equity Long Short, JCP Investment Partners

Jai Mirchandani

Australian Equity Long Short

Combining the art and science of investing

JCP Investment Partners

JCP is a research-driven, fundamental Australian Equities investment manager. We were founded in 1998 and are 100% owned by our employees, directors and associates. With almost 20 years of organisational experience we have a proven performance record in both bull and bear markets. Our alignment policy is based on the principles of employee ownership and co-investment.

We recognise the value in retaining an experienced and stable team, together with operating within a theoretically robust and proven investment framework. At the heart of our investment process is our commitment to maintaining a large ‘in-house’ research team, which is supplemented by proprietary external research. 

Our competitive advantage lies in our ability to combine the art and science of investing, providing an edge that is difficult for other investors to replicate.  

Our business strategy is to deliver long-term excess returns to our clients and maximise returns to our shareholders, within an entrepreneurial culture that allows our employees to achieve their full potential.
JCP’s proprietary investment platform allows for efficient processing of our research insights, and more efficient idea generation through our smart optimisation platform.  We then combine this with a sensible qualitative overlay through the experience and ‘gut feel’ of our Portfolio Construction team. 

We believe the sophistication of our process is a source of enduring competitive advantage, enabling us to continue to generate long-term excess returns for our clients. The flexibility and scalability of our resources, provide us with the tools to have meaningful conversations with our clients about their needs and how we can create solutions to better meet these needs.

JCP holds Australian Financial Services Licence No. 247132.

Equity Bottom-Up

At over 35x PE multiple, the stock looks extremely expensive with a lot of belief baked into the stock price. The question that needs to be asked is whether the company can deliver on growth and beat the high expectation over a multi-year period.Company and product facts<ul><li>The company is the market leader in cochlear implants and commands ~60% market share globally.</li><li>Cochlear implants are usually required when hearing loss is so severe and hearing aids no longer work.</li><li>The two major competitors are Medel and Advanced Bionics (a division of Sonova), and they collectively have 30-35% share. Other players including Neurelec (William Demant) and Nurotron have the remaining 5-10% share (Analyst estimates).</li><li>Cochlear implants require surgery and therefore is a complex and technical product.</li><li>Revenues are split between Cochlear implant sales and Services sales. Services sales include processor upgrades and accessories such as batteries and are considered to be more consumer products. Furthermore there is no compatibility between brands and therefore if you are a cochlear implant recipient from a certain manufacturer, you are beholden to their service offering ie it is a razor/razor blade model with a very captive audience.</li></ul>

At over 35x PE multiple, the stock looks extremely expensive with a lot of belief baked into the stock price. The question that needs to be asked is whether the company can deliver on growth and beat the high expectation over a multi-year period.Company and product factsThe company is the market leader in cochlear implants and commands ~60% market share globally.Cochlear implants are usually required when hearing loss is so severe and hearing aids no longer work.The two major competitors are Medel and Advanced Bionics (a division of Sonova), and they collectively have 30-35% share. Other players including Neurelec (William Demant) and Nurotron have the remaining 5-10% share (Analyst estimates).Cochlear implants require surgery and therefore is a complex and technical product.Revenues are split between Cochlear implant sales and Services sales. Services sales include processor upgrades and accessories such as batteries and are considered to be more consumer products. Furthermore there is no compatibility between brands and therefore if you are a cochlear implant recipient from a certain manufacturer, you are beholden to their service offering ie it is a razor/razor blade model with a very captive audience.

Cochlear Ltd

Expensive Quality, but Worth Being There