Analysts favour F&P Healthcare over competition

Friday 2nd July 2004

It has taken more than two and a half years but Fisher & Paykel Healthcare shares are now back at the same price they listed at on the Nasdaq in November 2001.

While the company is no longer on that exchange, the chart clearly shows the change in fortune since the gloomy days of early 2002.

Part of Healthcare's success stems from it sticking closely to its core humidification technology throughout, ignoring the temptation to diversify into areas where it has no expertise.

The company makes heated humidification products for use in respiratory care and treatment of obstructive sleep apnea (OSA), a condition that stops breathing during sleep.

Most analysts now believe F&P has superior asset efficiency to that of its peers, namely Australian-based OSA operator ResMed and US giant Repironics.

First NZ Capital has upgraded its 2005 full-year revenue forecasts from $US151.8 million to $US155.6 million, based on its belief that earlier company guidance was too conservative. It has lifted its net profit forecast range from $63 million to $64.7 million and its 12-month price target from $12.53 to $13.70.

While F&P Healthcare's March year net profit fell 25% to $54.7 million, the figure came in slightly ahead of analyst forecasts.

First NZ Capital is bullish about the growth potential of the company's warmers and neo-natal division, which while a relatively small part of Healthcare's business had the potential to put on 20-30% over the short to medium term.

Other positives include further potential dual supplier relationships, a share split (to be voted on at the annual meeting next month), continuation of the on-market buy-back and the potential to increase the dividend payout to 100%.

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