Daily ShareChat: Fisher and Paykel Healthcare

By Jenny Ruth

Tuesday 29th June 2010

Fisher & Paykel Healthcare is a high quality company with substantial growth opportunities, says Craigs Investment Partners.

“On the basis of our forecasts, which assume the group can continue to deliver on its ambitious medium growth plans, the stock offers valuation appeal, trading at a 20% discount (when trading at $3.16) to our DCF (discounted cashflow)-derived intrinsic value estimate,” the broker says.

It expects new product launches will mean the company's core businesses will continue to grow strongly.

Its respiratory and acute care division will continue to leverage its technological expertise in respiratory humidification to move into associated market segments, progressively widening its addressable market.

Craigs says Fisher & Paykel's management estimates as new products currently under development are launched, the company's addressable market will potentially quadruple.

“This opportunity, coupled with underlying market growth driven by favourable demographic trends, underpins management's 15% medium term volume growth assumption.”

Its new ICON range of flow generators used to treat obstructive sleep apnea should lead to accelerated growth in the second half of 2011, Craigs says.

Craigs is assuming 15% volume growth from that division also, in line with management guidance. While, as an exporter, the company is exposed to exchange rate movements, it is substantially hedged for its 2011 financial year, the broker says.

Recommendation: Buy.

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