FPH is my second largest holding (12% by value) behind my largest POT (25% by value)
Looking back I see I became a holder in 2007 and have accumulated a few since then with the odd purchase and dividend reinvestment. My average buy in price is $3.192 and my compounding annual return on the investment is a pleasing 17.45%.
The ASM yesterday was a pretty positive affair and using Percy’s words “the Company and its shareholders are well positioned”… can’t add much re the FY17 projection released to the press… it’s the same as we were told at the meeting. I would just note that the Company result is going to reflect exchange rate fluctuations, 99% of its product is sold offshore after all. Talking with Mike Daniell he said that manufacturing in Tijuana (assuming the Mexican Peso tracks the US$) and taking direct control of their sales in the US helps with costs being in the same currency as sales. Setting up a distribution centre in California will help too. (Manufactured product from NZ and Tijuana will be sent to California for distribution).
73% of the product is still manufactured in NZ and working with currency will continue to be a key risk for the Company to manage.
They believe it is a key strength of the company to have the R & D closely associated with manufacturing… hence the additional investment at the Tamaki site rather than offshore.
The Company is marching toward sales of $1b and the take away for me was they believe the market for the Company’s products is strong and they expect growth experienced recently to continue. This being driven by demographics (aging population), an increased spend on healthcare in all countries they market to and that the Company’s products suit hospital systems that are increasingly looking at how they can treat patients at home rather than admit to hospital or discharge sooner into home care with supporting treatment in the home .
Also interestingly for me, even allowing for the capital spend on capacity here and in North America, directors still expect to move to distribution of 70% of profits to shareholders, and continue to reduce their already low (7.7%) gearing.
No financial help needed from shareholders at all, unless you would like to pop some or all of your dividends back in!
Of course there was discussion at question time about the action on patents against Resmed and their counter claim. We were told that no detailed discussion could be had beyond what had been announced, due to court confidentially. The Chair made it clear that protecting product research and development by way of patent right was viewed as essential investment in the Company’s success and that they are confident that sufficient resourcing is factored in to managing this key area of risk.
Asked when the court date was set to hear the claim and counter claim, the meeting was advised that US judicial system is not known for speed… could be 2-3 year wait for a hearing!
While on the patent subject, I asked at question time about the reference I had come across that the “average remaining life of FPH patent portfolio is 15.8 years”. This seems to be a weighted average figure of the patent life of products in the FPH range, most patents it seems have around a 20 year life.
So then my question was how is this risk managed, what happens when the competition gets to make the product? Talking to one of the FPH product marketers, he explained that their aim is to constantly evolve/improve/tweak their products so they can seek a new patents and continually reset the 20 year marketing window. Seems over the years they have developed this skill into a core competency if I am to believe what I was hearing, and I had no reason doubt that. (starting to see the moat here folks?)
That’s enough for tonight… will wrap up tomorrow night if you’d like some more?
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Originally Posted by dagoldtoof
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