New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Fisher & Paykel Healthcare Corp / Equity Bottom-Up

<h2>F&amp;P&nbsp;Healthcare</h2>
<p><strong>Unmasking ResMed’s 3Q20 Result</strong></p>
<p><strong>UNDERPERFORM</strong></p>
<p>Insights from ResMed's (RMD) 3Q20 result support our view of strong tailwinds for F&amp;P Healthcare's (FPH) Hospital segment, albeit temporary headwinds for sleep apnea diagnosis. RMD reported another quarter of market share gains in the key masks category, albeit market anecdotes suggest FPH's recent new products have modestly improved its growth trajectory — in line with our expectations of a return to industry growth rates for its Homecare segment from 2H20E. FPH offers a well-articulated, attractive long-term growth story and the COVID-19 pandemic will provide near-term earnings tailwinds. However, FPH remains one of the most expensive global medical device companies (growth-adjusted and absolute) and its valuation is also elevated vs history and Australasian growth peers. We see better value for risk elsewhere.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/115/original/image_1572335331588552199453.png?1588552202" class="editor-image img-responsive" data-smartkarma-image-id="131115"></figure>
<p><strong>Key take-outs in this edition</strong></p>
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<li><strong>RMD&nbsp;3Q20 result</strong>:&nbsp;The result was ahead of consensus and indicative of market share gains across both masks and flow generators.&nbsp;RMD&nbsp;reported 3Q20 constant currency revenue growth of +17%, or ~+12%&nbsp;adjusting for&nbsp;COVID-19 related demand, well ahead of industry growth. Gross margins were also modestly higher.</li>
<li><strong>Other recent data points</strong>:&nbsp;There is nothing to change our view that&nbsp;RMD&nbsp;is currently in pole position in the key masks category, supported by continued market share gain. Online data shows a slight change in fortunes in the most recent quarter in favour of Phillips, and to a lesser extent&nbsp;FPH.</li>
<li><strong>COVID-19 insights</strong>: Both RMD and FPH are direct beneficiaries of the COVID-19 pandemic. RMD reported a material spike in ventilator orders, which contributed ~4.5% to 3Q20 revenue. RMD also commented on a material decline (double digit) in new patient diagnosis for sleep apnea, albeit higher resupply for masks.</li>
<li><strong>Industry trends supportive</strong>:&nbsp;Sleep&nbsp;apnea&nbsp;remains&nbsp;underdiagnosed&nbsp;globally, growing acceptance of virtual diagnosis, value of remote monitoring and increasing importance of respiratory related health.</li>
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<p><strong>Our read through for&nbsp;FPH&nbsp;— trends already reflected in our forecasts</strong></p>
<div id="m_-68926759593523863i0zne-2-2-2-2-2-2">
<p>Direct quantitative read-through from RMD's result is difficult, given the very different product mix and limited product breakdown. However, commentary supports our near-term expectations for strong tailwinds for FPH's hospital consumables and hardware sales, albeit modest temporary headwinds from new patient diagnosis in homecare, as a result of the COVID-19 pandemic. Recent industry data and anecdotes support a modest improvement in FPH's growth profile for sleep apnea masks, helped by early signs of success for its new products, however, the backdrop remains highly competitive, likely constraining new product upside for any manufacturer. All these thematics are already reflected in our near-term FPH forecasts.</p>
<p>​​​​​​​In the longer-term, there is upside risk from greater adoption for FPH's 'new applications' (non-invasive ventilation and/or high flow oxygen therapy consumables) within its Hospital segment, albeit there is risk the competitive landscape is heightened given the current growing focus of a number of companies on this area.</p>
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<div><strong>Chelsea Leadbetter CFA</strong></div>
<div><a href="mailto:chelsea.leadbetter@forsythbarr.co.nz" target="_blank" rel="noopener">chelsea.leadbetter@<wbr>forsythbarr.co.nz</a></div>
<div>+64 4 495 5262</div>
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F&amp;P&nbsp;Healthcare
Unmasking ResMed’s 3Q20 Result
UNDERPERFORM
Insights from ResMed's (RMD) 3Q20 result support our view of strong tailwinds for F&amp;P Healthcare's (FPH) Hospital segment, albeit temporary headwinds for sleep apnea diagnosis. RMD reported another quarter of market share gains in the key masks category, albeit market anecdotes suggest FPH's recent new products have modestly improved its growth trajectory — in line with our expectations of a return to industry growth rates for its Homecare segment from 2H20E. FPH offers a well-articulated, attractive long-term growth story and the COVID-19 pandemic will provide near-term earnings tailwinds. However, FPH remains one of the most expensive global medical device companies (growth-adjusted and absolute) and its valuation is also elevated vs history and Australasian growth peers. We see better value for risk elsewhere.

Key take-outs in this edition


RMD&nbsp;3Q20 result:&nbsp;The result was ahead of consensus and indicative of market share gains across both masks and flow generators.&nbsp;RMD&nbsp;reported 3Q20 constant currency revenue growth of +17%, or ~+12%&nbsp;adjusting for&nbsp;COVID-19 related demand, well ahead of industry growth. Gross margins were also modestly higher.
Other recent data points:&nbsp;There is nothing to change our view that&nbsp;RMD&nbsp;is currently in pole position in the key masks category, supported by continued market share gain. Online data shows a slight change in fortunes in the most recent quarter in favour of Phillips, and to a lesser extent&nbsp;FPH.
COVID-19 insights: Both RMD and FPH are direct beneficiaries of the COVID-19 pandemic. RMD reported a material spike in ventilator orders, which contributed ~4.5% to 3Q20 revenue. RMD also commented on a material decline (double digit) in new patient diagnosis for sleep apnea, albeit higher resupply for masks.
Industry trends supportive:&nbsp;Sleep&nbsp;apnea&nbsp;remains&nbsp;underdiagnosed&nbsp;globally, growing acceptance of virtual diagnosis, value of remote monitoring and increasing importance of respiratory related health.


Our read through for&nbsp;FPH&nbsp;— trends already reflected in our forecasts

Direct quantitative read-through from RMD's result is difficult, given the very different product mix and limited product breakdown. However, commentary supports our near-term expectations for strong tailwinds for FPH's hospital consumables and hardware sales, albeit modest temporary headwinds from new patient diagnosis in homecare, as a result of the COVID-19 pandemic. Recent industry data and anecdotes support a modest improvement in FPH's growth profile for sleep apnea masks, helped by early signs of success for its new products, however, the backdrop remains highly competitive, likely constraining new product upside for any manufacturer. All these thematics are already reflected in our near-term FPH forecasts.
​​​​​​​In the longer-term, there is upside risk from greater adoption for FPH's 'new applications' (non-invasive ventilation and/or high flow oxygen therapy consumables) within its Hospital segment, albeit there is risk the competitive landscape is heightened given the current growing focus of a number of companies on this area.




Chelsea Leadbetter CFA
chelsea.leadbetter@forsythbarr.co.nz
+64 4 495 5262




F&P Healthcare: Unmasking ResMed’s 3Q20 Result