What You Need To Know About Fisher & Paykel Healthcare and EBOS Group?

  • Oct 22, 2019 AEDT
  • Team Kalkine
What You Need To Know About Fisher & Paykel Healthcare and EBOS Group?

Health care system in Australia is delivered, operated and financed by the central as well as state and territory governments. Moreover, private sector and not-for-profit organisations make contributions towards the country’s health care system. Every investor knows, it is critical to study what’s going on in the market before making any decisions, regardless of the exchange you’re trading on. With that in mind, we’re discussing two ASX listed market players - FPH and EBO.

Fisher & Paykel Healthcare Corporation Limited (ASX: FPH)

A leading medical devices and systems company, Fisher & Paykel Healthcare Corporation Limited (ASX: FPH) is engaged in providing solutions for use in respiratory care, acute care, surgery and the treatment of obstructive sleep apnoea (OSA). The comspany is listed on ASX since 2001 and sells its products in more than 120 countries across the globe.

Fisher & Paykel is serving and impacting the lives of ~14 million patients around the globe.

Key Highlights for FY2019

  • In the financial year 2019 ended 31 March 2019, the company introduced three products in the market- F&P ViteraTM full face mask, F&P OptiflowTM 3S nasal cannula, and a new neonatal breathing circuit for the F&P 950TM Heated Humidification System.
  • Approximately 3 million patients were treated with Optiflow nasal high flow therapy over the past year.
  • The company completed construction of its another manufacturing facility in Tijuana, Mexico, with operations to commence during FY20.

Global Patent Infringement Litigation Settlement

In February 2019, Fisher & Paykel Healthcare signed an agreement with ResMed to settle all outstanding patent infringement disputes between the companies in all venues worldwide.

Under this agreement, all ongoing infringement proceedings against named products were dismissed. The settlement involved no payment by either party.

Upgrade in Guidance

  • After receiving regulatory approval for selling F&P ViteraTM mask in the US market, on 14 October 2019, the company updated its guidance related to revenue and earnings for the financial year ending 31 March 2020.
  • The company is expecting operating revenue amounting to approximately NZ$1.19 billion and net profit after tax to be around NZ$255 million to NZ$265 million for FY20, according to its new guidance, assuming a NZ:US exchange rate of ~63 cents for the remaining year.
  • In the previous full-year guidance, operating revenue was expected at approx. NZ$1.17 billion and net profit after tax was approximately NZ$245 million to NZ$255 million, based on a NZ:US exchange rate of 64 cents.

Full-face Mask for OSA Available in US

In another ASX update, the company disclosed that its new mask F&P ViteraTM for obstructive sleep apnoea (OSA) is now available for purchase in the US market. The product is already available in Australia, Canada, New Zealand and Europe. The company is set to launch the product in other regions, pending regulatory approvals.

About F&P ViteraTM Mask

F&P Vitera is the company’s new full-face mask used for the treatment of obstructive sleep apnea (OSA), providing high levels of stability and durability through a combination of unique technologies with minimising leaks and pressure on the bridge of the nose by its RollFitTM XT Seal.

F&P Vitera Mask

Outlook

The company is expecting capital expenditure for FY2020 to be approximately NZ$150 million, as it increases capacity for both existing and new products and completes construction of the fourth building on the Auckland campus.

Stock Performance

The company’s stock closed the day’s trading at $17.680 with a daily volume of 180,271 and a market capitalisation of approximately $10.11 billion, at the market close on 22 October 2019. The stock has delivered a return of 45.33% on a YTD basis and 19.32% in the last six months.

EBOS Group Limited (ASX: EBO)

Most diversified Australasian company, EBOS Group Limited (ASX: EBO) is engaged in marketing, wholesale and distribution of healthcare, medical, pharmaceutical and animal care products.

According to the company’s 2019 annual report for the year to 30 June 2019, the company completed two significant projects, which are designed to support the future capabilities of its healthcare business in Australia.

Business Highlights

  • EBOS has its business in 57 locations in Australia and New Zealand, covering major portions. i.e. 72% in Australia and 28% in New Zealand, including 82% of healthcare and 18% of animal care business.
  • Red Seal’s growth in global markets continued at pace in the 2018-19 financial year, highlighted by an increased presence in China, Korea and Japan, and expansion into Malaysia.
  • Red Seal has gained continued success in the Australian market, with an expanded presence in grocery stores. Driving this success are Red Seal fruit teas, which are now available in a range of flavours through both Woolworths and Coles nationally and with feedback from customers being overwhelmingly positive.
  • Red Seal continues to be an excellent driver of noteworthy global and local success for EBOS and the brand has a strong future, as consumers increasingly gravitate towards trusted natural health products.
  • Black Hawk reported strong sales growth and expanded its range of Original and Grain Free dog and cat food products during the year FY2019.

Healthcare Immunisation Program

  • EBOS Healthcare is the biggest promoter of the annual influenza vaccination initiative, which is coordinated by the Immunisation Coalition of Australia.
  • In 2019, it has observed that around 1,000 people given free flu vaccines at two public events in Melbourne, with EBOS Healthcare being the main contributor through the donation of vaccines for the event.

During FY2019, the business completed several strategic acquisitions. The company invested $93.6 million during the year.

  • EBOS acquired all the minority shares in Terry White Group Limited for $46.7 million in December 2018.
  • The company expanded its business by acquiring Warner & Webster (“W&W”) worth for $32.0 million.
  • Animal care’s Australian vet wholesaling business was expanded by acquiring Therapon for $5.7 million.
  • The company expanded its consumer products business with the acquisition of the Quitnits head lice brand in December 2018.

Healthcare Immunisation Program

FY19 Performance Based on Healthcare and Animal Care Sectors-

Healthcare Sector-

  • For healthcare segment, the company’s revenue in Australia was down by 3.5%, although it was up 5.2% when hepatitis C medicine sales and PBS price reforms were excluded.
  • Growth in Institutional Healthcare and Contract Logistics resulted in a rise of 5.7% in underlying EBITDA; however, it was found to be partially offset by a subdued Wholesale Pharmacy result.
  • As compared to all business units, New Zealand’s revenue showed robust growth, resulting in a rise of 8.7%. The earnings were affected by cost increases in labour and freight in the company’s wholesale businesses.
Animal Care Sector-
  • Animal Care segment recorded an EBITDA growth of 5.7% for the year, as the business continued to benefit from the excellent performance of its branded products.
  • Total Animal Care revenue growth of 1.0% was impacted by a decline in the company’s Lyppard wholesale business, as a result of the decision of an animal health manufacturer to bypass the wholesale channel, which affected revenue by approximately $21 million.

Outlook

In FY2019, EBOS recorded a solid underlying financial performance, and the company is assured of a significant increase in earnings in FY20.

LMT and National Surgical Acquisition

  • As per an ASX update on 15 October 2019, the company entered the medical devices sector with the acquisition of LMT and National Surgical (NS).
  • The deal was priced at $34 million.
  • This acquisition will help EBOS to grow enormously into the medical devices sector in Australia and New Zealand, valued at approximately $8 billion.
  • The company is expecting revenue of approximately $40 million from the new business.
  • In FY20, this acquisition is unlikely to have a material outcome on earnings. It is expected to meet the company’s return on capital employed hurdle of 15% within two years.

During the company’s 97th annual meeting announcement, EBOS appointed Liz Coutts as a new chairperson after retirement of Mr Mark Waller, effective from 15 October 2019.

Stock Performance

The company’s stock closed the day’s trading at $23.200 with a daily volume of 4,673 and a market capitalisation of approximately $3.76 billion, at the market close on 22 October 2019. The stock has delivered a return of 18.97% on a YTD basis and 12.90% in the last six months.


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