SUCCESS
Analysts toast F&P Healthcare’s success as shares settle above $10

Fisher & Paykel Healthcare has been a quiet achiever.

Fisher & Paykel Healthcare has been a quiet achiever.

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Financial analysts are lauding the success of Fisher & Paykel Healthcare after its shares closed above $10 for the first time in its unofficial 45 year-history.

The high-tech exporter, which is due to report its annual results on Friday, has seen its value on the NZX rise by more than $4 billion over the past 4½ years.

F&P entered the respiratory care market in 1971 but was only split off from F&P’s whiteware business in 2001.

With a market value of more than $5.7b, it is now worth just $127m less than construction giant Fletcher Building.

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F&P Healthcare missed out to electronic components company Rakon as “company of the decade” at the HiTech Awards in 2011.

But Craigs Investment Partners analyst Stephen Ridgewell said it had a lot of lessons to teach the market.

“They have amongst the best corporate governance in Australasia and have very clear and accurate communications with shareholders. They have built up a lot of credibility and trust with the market and investors.

“It is not an overnight success story but there are not many New Zealand exporters which have become dominant players in a global market including North America.

“Fisher & Paykel is a great New Zealand success story and we want more of them.”
Forsyth Barr analyst Chelsea Leadbetter said the company’s share price rise reflected a series of earnings upgrades over the past four years and a bit of help from currency movements.

Consensus forecasts were that it would report a $141m underlying profit on Friday, she said.

Leadbetter doubted F&P Healthcare would split its shares just because they had topped $10. “I’d like to think we are little more mature than that.”

No-one was overly concerned about the transition in April to a new chief executive, Lewis Gradon, she said. That was given he had been “in the business forever” and that former boss Michael Daniel remained on the company’s board, she said.

Ridgewell said F&P Healthcare was trading at a premium to its peers in the medical device sector in the United States.

“When they get successful they don’t have to go offshore.

“It is on the radar of a number of global investors and there is good liquidity in the stock and its story is well understood and supported in this part of the world.

“They have a pool of investors further afield and they do investor relations globally.”

Forecasts were for continued growth in the business, Ridgewell said.

“We think if they are able to deliver in line with our forecasts then the company will continue to perform well.

“But we’d also caution the returns investors should expect over the next four or five years will not be as great as over the last five years because you have had a story of top-line growth and [profit] margin expansion … and also the currency has gone in their favour.”

Its profit margins – before interest charges and tax and disregarding currency hedging – had risen from 8 per cent to 26 per cent but might settle around 30 per cent, Ridgewell said.

“You won’t get this ‘double whammy’ of fast revenue growth combined very fast operating leverage to the same extent.”

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