Fisher & Paykel Healthcare Corporation Limited (ASX: FPH)

Increase in R&D expenses- The Company issued 1,630 Ordinary shares at an issue price of $3.57 in pursuant to the Company’s 2013 issue of options under the Fisher & Paykel Healthcare 2003 Share Option Plan. The issue of options and shares under the Option Plan was approved by the Board on 27 August 2013. 2,230 options were cancelled on 28 May 2018 pursuant to the earlier decided Cancellation Offer and therefore 1,630 shares were issued in consideration of the cancellation of the options and were equal in value to the gain on the options. The Group reported an increase of 12 per cent over the previous year in the net profit after tax that amounted to NZ$190.2 million for the year ended 31 March 2018. The Operating revenue was at record NZ$980.8 million, 10 per cent above the prior year, with 87 per cent of revenue contributed from recurring items, such as consumables and accessories.


Financial Performance Indicators (Source: Company Reports)

The Board approved an increased fully imputed final dividend of 12.50 cents per share and with this, the total dividends for the year amounted to 21.25 cents per share and it recorded an increase of 9 per cent on the previous year. Moreover, gross margin, at 66.3 per cent, increased by 31 basis points due to a favourable product mix and increased volume from the Mexican manufacturing facility. The Group continued to invest in R&D and the expenses grew by 10 per cent and amounted to NZ$94.7 million. During the year, the Group launched Optiflow Junior 2 in the US, Canada, Europe and India. It has a strong new product pipeline including more of new humidification systems, flow generators, masks and consumables. The Hospital product group revenue experienced a growth of 14 per cent and amounted to NZ$572.1 million.  The Group expects that capital expenditure for FY19 will be in the range of NZ$160 to NZ$170 million as the Group is planning to increase capacity for both existing and new products and expects that net profit after tax will be approximately NZ$210 million (based on current exchange rates). Since the start of the year, the stock price declined by 5.21 per cent but recovered in the last one month and climbed up by 4.73 per cent. The Company’s current growth profile and PE Ratio are a bit debatable and the stock looks “Expensive” at the current market price of $12.12.

Sonic Healthcare Limited (ASX: SHL)

Reporting of Misdiagnosed cases - SHL, a healthcare company that is focused on services in medical diagnostics and multidisciplinary medical practices, reporteda statutory net profit for the half year to 31 December 2017 of A$229 million, on revenues of A$2.67 billion. Meanwhile, Louis James Panaccio acquired 71 fully paid ordinary shares in Sonic Healthcare Limited. During the year, the Health Group was selected as the laboratory partner for the Australian Government’s National Bowel Cancer Screening Program. Sonic’s European operations experienced strong organic revenue growth and UK growth enhanced as the Group won an exclusive contract in October 2017, to provide laboratory services to Barnet Hospital and Chase Farm Hospital in London. This will add to the Group’s annual revenue over £12 million.


H1 FY 2018 Revenue Split (Source: Company Reports)

 Moreover, the Company’s Australian diagnostic imaging business achieved strong organic revenue and earnings growth which was due to the investments made in equipment and greenfield sites over recent years, as well as ongoing efficiency strategies. Lately, the Company came into controversies that it gave the patients the “all clear” reports but later on it came into notice that they were at high riskof cervical cancer and further the Company’s US lab had to pay £2.5 million ($4.4 million) to an Irish woman. But the Group was reassuring its investors that it was the only incident reported so far but otherwise Company has a good reputation in the market for its best practices. In last six months, the stock was up by 8.46 per cent and rose up by 2.52 per cent in last one month. The stock marginally declined by 0.58 per cent in last five days and was down by 1.29 per cent as on 28 May 2018. The stock looks “Expensive” at a current market price of $23.66.

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