FPH - Fisher Paykel Healthcare.

[BlackPeter]

Hammer formation today. Could be an indicator for the SP bouncing back at the MA 30.

[hardt]

FISHER & PAYKEL HEALTHCARE	FY13A	FY14A	FY15A	FY16A	FY17A	FY18F	FY19F	FY20F
OPERATING REVENUES GENERATED - NZDm	507.3	568.6	644.0	818.5	869.5	1010.0	1175.0	1300.0
Cost of goods sold as a proportion of product trading revenues	58.00%	54.90%	50.70%	44.90%	44.90%	46.00%	46.00%	46.00%
Corporate costs as a percentage of trading revenues	24.70%	24.90%	23.18%	25.30%	24.10%	25.00%	25.00%	25.00%
OPERATING EBITDA GENERATED - NZDm	87.7	114.8	168.4	244.3	269.9	315.0	370.0	430.0
ADJUSTED NPAT	24.3	37.6	82.0	143.4	160.1	195.0	240.0	275.0
ADJUSTED EARNINGS PER SHARE	4.28cps	6.62cps	14.45cps	25.27cps	28.22cps	34.37cps	42.29cps	48.46cps

Moderate forecast in my opinion and if the market continues with its appreciation towards FPH I could see the below playing out... Can't forecast sentiment.

FPH.NZX - 2016/2021	FY17F	FY18F	FY19F	FY20F
ADJUSTED EARNINGS PER SHARE	28.22cps	34.37cps	42.29cps	48.46cps
SP AT 52WK FORWARD EARNINGS MEAN OF 35	$12.02	$14.80	$16.96	$18.60

[percy]

Just playing around here.
me an is mean.
....................................2016.......... ....2017........2018.........2019........2020
EPS www.4tradwes.com.. .25................29.5..........33.3..........39. 2........46.6
eps.growth................................18%..... ......12.8%.........17.7%.......11.7%...........me an/average.15.5%
EPS......Hardt.................25.27.............2 8.22.........34.37.........42.29......48.46
eps.growt.................................11.67%.. ......21.17%.........23%........14.5%...........me an/average.17.5%
Question.What is a fair PE for a company growing between 15.5% and 17,5%.?
The current PE is 37.5.

[forest]

I would say a lot less then 35. Especially with the looming legal issues.

[winner69]

Just playing around here.
me an is mean.
....................................2016.......... ....2017........2018.........2019........2020
EPS www.4tradwes.com.. .25................29.5..........33.3..........39. 2........46.6
eps.growth................................18%..... ......12.8%.........17.7%.......11.7%...........me an/average.15.5%
EPS......Hardt.................25.27.............2 8.22.........34.37.........42.29......48.46
eps.growt.................................11.67%.. ......21.17%.........23%........14.5%...........me an/average.17.5%
Question.What is a fair PE for a company growing between 15.5% and 17,5%.?
The current PE is 37.5.

About 30 - 35 .....as its always been

[percy]

I would say a lot less then 35. Especially with the looming legal issues.

Agree.
I think we must also remember the current PE is 37.5, which is really thirty seven and a half YEARS current year's earnings.ie nearly 40 years?
Hardt's mean eps growth is 17.5% ,so FPH is trading at present time over twice eps growth.
W69 is correct that FPH has always traded on a PE between 30 and 35.
I would think 50% higher than Hardt's mean 17.5 % eps growth, which would be a PE of 26.25.may be fair or very fair value.
Litigation.Forest mentioned looming legal issues.These are very real and are going to be considerable.Have analysts accounted fully for them?

[forest]

"An estimate of the financial effect cannot be made".

This in relation to litigation.
The financial effect is a total unknown it seems.
The litigation can be potentially profitable for them if they get payed for infringements or it could be very costly if they have to pay.
Something in between is more likely of course but the fact that the company state that it is not possible to make an estimate is a worry.

What we do know that just over $20mil was spent on litigation last FY and this FY FPH expect the same.

But the real cost might not be the $20mil a year spend on litigation or the possible payout, but the distraction those court cases create for management and directors.
So far FPH seem to be able to handle the distraction of litigation alright but will this continue?

[hardt]

"An estimate of the financial effect cannot be made".

This in relation to litigation.
The financial effect is a total unknown it seems.
The litigation can be potentially profitable for them if they get payed for infringements or it could be very costly if they have to pay.
Something in between is more likely of course but the fact that the company state that it is not possible to make an estimate is a worry.

What we do know that just over $20mil was spent on litigation last FY and this FY FPH expect the same.

But the real cost might not be the $20mil a year spend on litigation or the possible payout, but the distraction those court cases create for management and directors.
So far FPH seem to be able to handle the distraction of litigation alright but will this continue?

Hypothetically speaking, let's say they lose the formidable rubber strap patent - which is used to fasten the sleep apnoea mask onto patients big ol' mugs... would this bring any operation of theirs to a grinding halt?

A hell of a lot has to go wrong before arriving at the worst case scenario... probability is subjective of course.

All of the broker reports I can see are mindful of the litigation, but have stated that the case itself will have barely any material impact on the underlying operations moving forward...

The litigation is worth a closer look, but the quants are supportive of a strong long term investment even when accounting for a year or two of larger one off costs...

[forest]

hardt at the last ASM it was mentioned that it is typical of a litigation of this nature to take 10 years to get resolved.
This together with the unknown outcome and longterm distraction and high PE could make FPH a less than ideal investment.

Another way one can look at the litigation is that supplying medical equipment in the US is competing with the big boys and litigation is just a normal part of doing business.

[hardt]

hardt at the last ASM it was mentioned that it is typical of a litigation of this nature to take 10 years to get resolved.
This together with the unknown outcome and longterm distraction and high PE could make FPH a less than ideal investment.

Another way one can look at the litigation is that supplying medical equipment in the US is competing with the big boys and litigation is just a normal part of doing business.

Uncertainty is not enough reason for me to doubt the return on this kind of growth profile.

Sure the sentiment could take a blow, but the material impact would likely be minimal... as we saw the market back in Dec.

The previous lot of litigation thrown out by RMD was kaka, I can always re-evaluate when RMD file their next one.

I have been moderately generous with the litigation costs in the following years...

FISHER & PAYKEL HEALTHCARE	FY17A	FY18F	FY19F	FY20F	CAGR
OPERATING REVENUES GENERATED - NZDm	869.5	1010.0	1175.0	1300.0	14.35%
LITIGATION COSTS - NZDm	20.0	25.0	30.0	35.0	*
Litigation costs as a percentage of trading revenues	2.30%	2.48%	2.55%	2.69%	*
OPERATING EBITDA GENERATED - NZDm	269.9	310.0	370.0	430.0	16.79%
ADJUSTED NPAT	160.1	195.0	240.0	275.0	19.76%
ADJUSTED EARNINGS PER SHARE	28.22cps	34.37cps	42.29cps	48.46cps	*

The stock has performed well enough so far, watching closely as it runs along.