Yovich & Co. Weekly Update - 27 May 2013

May 27, 2013 | Commentary

This Week's Themes

• The NZ market continued its slide as investors take profits after a 51% rally in the gross index over the last 22 months and the weakness in the Australian market weighed on the local market.

• The Aussie market has fallen sharply as talks of recession in the mining sector spreading to the wider economy prompted local investors to take profits. International funds also look to be unwinding the carry trade as indicated by a further fall in the AUD/USD exchange rate.

• After reaching another all time high in the previous week, the U.S markets took a breather as the market considers what impact a tapering off of Fed stimulus would have on share prices.

• European stocks were also down with a focus on slower Chinese manufacturing data and softer markets across the Atlantic.

• The Kiwi fell against the USD, dragged down by weakness in the Aussie Dollar.

Investment News

Fisher & Paykel Healthcare Corporation (FPH.nz) – Strong Outlook and Long USD

FPH is a leading designer, manufacturer and marketer of heated humidifiers for use in respiratory and acute care (RAC - 54%) and the treatment of obstructive sleep apnoea (OSA – 42%), combining to make up 96% of revenues. They reported improved profits, up 20% on last year to NZ $77.1 million and declared fully imputated dividend of 7 cents, ex on 19 June.

The respiratory health segment is estimated to be worth US $3.0 billion a year and a growing market opportunity for FPH with plenty of capacity to grow at their production facilities in Auckland and Tijuana, Mexico. The current breakdown of worldwide revenue is: North America 43%, Europe 33% and Asia Pacific 19% providing significant exchange rate exposure. Forecasts for 2014, dependent on the exchange rate (expected at 0.80 to 0.85 NZD.USD) were indicated by FPH as Net Profit for between NZ $85 million and NZ $90 million.

First NZ Capital has an outperform recommendation and 12 month price target of $3.65, current price is $3.21.

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Jarrod Goodall



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