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Daily ShareChat: ResMed

Thursday 5th August 2010

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ResMed, which is market leader in the obstructive sleep apnea (OSA) products market, has proved itself as an enduringly high growth business over the last 15 years, says James Cooper, an analyst at Aegis Equities Research.

"An attractive feature is a large untapped market." About one in five adults have some form of OSA but only 10% are diagnosed in the US and even fewer elsewhere, Cooper says.

"While US reforms will aim to contain healthcare spending, ResMed should be a beneficiary of the focus on preventative care as sleep-disordered breathing (SDB) therapy may help reduce some chronic diseases, thereby cutting long-term costs," he says.

Nevertheless, "we are not sure that such economic benefits are sufficiently explicit for SDB products to avoid the budget knife."

The Australian and New York-listed ResMed is estimated to have between 40% and 50% of the estimated US$2.2 billion (NZ$3.03 billion) OSA treatment market while New Zealand-based Fisher & Paykel Healthcare Corporation has about 7%.

ResMed's earnings-per-share have a record of strong growth followed by consolidation. "After a period of impressive growth and a strong outlook due to the success of new products, the share price has run well ahead of our A$6.25 valuation," Cooper says.

Recommendation: Reduce.



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