-May be strategic
-No near-term gain
-Diversifies revenue
 

By Eva Brocklehurst

Primary Health Care ((PRY)) has moved into the private health insurance sector, with the acquisition of Transport Health from the Transport Friendly Society for $18m. As part of the transaction, Primary will acquire a Melbourne-based dental facility that serves existing Transport Health members. The insurer is small, with 5,000 members, and generated revenue of $16.3m in FY13 with a net insurance margin of 5.3%.

Primary previously considered expanding into private health insurance, taking a small stake in nib ((NHF)) which it ultimately sold in 2010. The private health insurance market does offer the potential for further consolidation but, based on the current balance sheet and near-term capex requirements, Credit Suisse does not believe now is the appropriate time to be embarking on a more material deployment of capital in this area. In the longer term, legislative changes may allow the coverage of outpatient medical services, such as GP visits and diagnostics, and then Primary Health Care would be well placed to offer these services in order to attract membership.

UBS was confounded by the move, envisaging no absolute connection between general practice and the insurance industry. Taking a longer term view, the broker acknowledges there is potential for greater interplay between the industry and GPs, but Transport Health is a sub-scale entry point in this regard. The broker is also points out that, if Primary can increase membership rates buy selling the fund via its GP channel, this carries risk of overweighting selection of the ill. The broker can only conclude that Primary Health Care will choose to run the fund at a zero margin and engage with its GPs to direct volume and funds into the business, or it may simply be an asset trade. At least the deal is small, so UBS makes no changes to forecasts, retains a Buy rating and awaits further clarification on the metrics.

Citi considers the stock, regardless, is too cheap to ignore and maintains a Buy rating. The earnings impact from such a small acquisition is negligible but Primary Health Care will apply to convert Transport Health to an open-access fund, enabling the development of products and membership growth. Citi also believes the acquisition is strategically sound, as it provides options and avenues to leverage existing medical infrastructure and, in the future, the potential for a cost-efficient integrated delivery network could be of significant value.

Given regulations explicitly prohibit insurance cover for out-patient services, the synergies, in Deutsche Bank's view, come from directing members to Primary Health Care's centres. The deal may prove smart if the sector is de-regulated but at present Deutsche Bank expects the focus to be on providing a low-cost alternative in the relatively crowded health insurance market. From JP Morgan's point of view the acquisition could alleviate some of the funding risk by diversifying revenues away from government reimbursement as growth gets harder to come by. The broker believes the entry into private health insurance highlights the uncertainty inherent in a potential GP co-payment and the risks around growth in the key medical centres business.

The company has pointed out there is potential to achieve better outcomes with hospital operators than is possible through small health insurer buying groups, given Primary Health Care already has contracts for the provision of radiology and pathology services. Nevertheless, operational benefits appear to be a long way off and JP Morgan expects minimal earnings impact for at least two years. With capex on the rise again the broker prefers a Neutral rating.

On FNArena's database ratings include three Buy, four Hold and one Sell. The consensus target price is $4.95, suggesting 10.8% upside to the last share price. The dividend yield on FY15 and FY16 forecasts is 4.8% and 5.3% respectively.
 

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-HyQvia may be more convenient
-Risk to Hizentra's market dominance
-Debate over extent of patient switching
 

By Eva Brocklehurst

Blood product competitors will tussle over market share in the next year. Baxter has received key US Food and Drug Administration approval, as was expected, for its subcutaneous immunoglobulin product, HyQvia, used for the treatment of adults with primary immunodeficiency. This is a rival to CSL's ((CSL)) Hizentra. Moreover, the product label for HyQvia appears non-restrictive, with possibly better pharmacological and economic value than Hizentra. It does not require the monitoring of patients for rHuPH20 antibody levels and this may prove an important determinant in uptake and patients switching to HyQvia from Hizentra, in CIMB's view. Baxter expects to launch HyQvia in coming weeks.

CIMB believes HyQvia puts Hizentra's market dominance at risk. While it remains difficult to determine the impact of HyQvia, as pricing is yet unknown, the broker is not making changes to CSL's forecasts. Nevertheless, downside risk for Hizentra's market share could be in the realm of 5-10% and CIMB retains a Hold rating.

WilsonHTM has a Buy rating and $81.80 target for CSL, and maintains this status, ahead of the AGM next month when a trading update and consideration of a new buy-back initiative are expected. Baxter's announcement does not worry the broker unduly. WilsonHTM believes Hizentra is the best in the market and CSL's incumbency matters.

The broker also highlights the pre-treatment step, required for administration of HyQvia, which has important risk factors which worried the FDA. The pre-treatment required is a recombinant human enzyme. HyQvia is Baxter's Gammagard product administered another way with more risk, in the broker's opinion, whereas CSL's Hizentra has been well accepted since its approval in 2010, on account of dosing flexibility, higher therapeutic intensity and room temperature stability. WilsonHTM makes modest allowances for the arrival of a competitor but does not anticipate a significant impact this year.

CSL was upbeat about the potential threat of HyQvia at its FY14 results briefing, not expecting patients already on Hizentra will switch products. Citi considers this stance to be a little optimistic. The installed base of patients is the most obvious target for HyQvia and Baxter is selling a more convenient product. This is because there are less frequent dosing requirements, and one injection site versus multiple injection sites with Hizentra.

If patients can easily try HyQvia and find it works they will keep using it. If not, they will switch back. That is Citi's argument. Furthermore, the broker notes Baxter has a good track record when it comes to marketing its products. Hizentra is a $500m per annum earner for CSL and the rate of growth is 19%. Citi calculates this growth is more important than the actual earnings impact as, relative to CSL's $5bn in sales, Hizentra is modest. A reduction in growth would reduce the overall immunoglobulin franchise growth and this should be of concern to investors, because CSL's product mix is skewed to immunoglobulins and these are, in turn, a driver of the company's expansion.

Citi observes CSL has enjoyed a virtual monopoly position in subcutaneous immunoglobulin in the US since 2006 and new competition will likely be a negative. The broker believes the stock is slightly expensive, given some of the risks which may affect the business in FY15, and retains a Sell rating. This is the lone Sell on FNArena's database, where there are one Hold (CIMB) and six Buy ratings for CSL. The consensus target is $75.23, suggesting 3.4% upside to the last share price. Targets range from $60.34 (Citi) to $85.00 (UBS).
 

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-High growth in top hospitals
-Pathology more subdued
-Key catalyst late Sept
 

By Eva Brocklehurst

Healthscope ((HSO)) is in a comfortable place, provided by a rosy outlook for the private hospital business given Australia's demographic trends. Healthcare represents 9.5% of Australia's GDP and 47% of the population has private health insurance. Moreover, 20% of the population is over 60 and the rate of aging is rising.

Australia's second largest private hospital operator appears eminently capable of replicating the growth strategy of Australian peer, Ramsay Health Care ((RHC)), in BA-Merrill Lynch's view. Healthscope has 12 large hospitals which, on a bed basis, represent 45% of the portfolio. Over 80% of $600m in planned capex over the next three years will be spent on the more profitable tier one hospitals, which underscores the broker's expectations for margin expansion of 100 basis points in FY15/16.

Earnings are driven by patient volumes, private health insurer contract pricing and cost inflation. Volumes are resilient and insurer contract pricing is secured for two years. This significantly de-risks earnings variance, in the broker's opinion. Wage inflation is lower than usual and procurement savings have been targeted. Merrills believes the government-run hospital sector will start to run out of public beds by FY17 and this should lead to outsourcing of patients to the private sector. This underpins the broker's forecasts for high single digit earnings growth from FY17.

Merrills initiates coverage with a Buy rating and $2.60 target. There is one obvious catalyst in the near term that the broker expects will provide upside potential to the target. Healthscope is short-listed to operate the planned Northern Beaches hospital. A partnership with the NSW government could add 3% upside to FY18 earnings estimates. Healthscope is one of two final bidders to develop and operate the new 423 bed public/private hospital and the successful applicant will be decided later this month.

Goldman Sachs has also initiated coverage, with a Buy rating and $2.40 target. Healthscope is expected to deliver strong earnings growth over the next three years driven by capacity expansion, agreed price growth and efficiencies, Goldman suggests. The broker expects the share price to be well supported in the medium term by expanding existing hospitals and opening new ones, such as on the Gold Coast. This should underpin both scale and margin.

Goldman expects revenue growth of 7% over FY14-16, based on admission volumes and pricing in the hospital division. Deutsche Bank also believes share price performance will be contingent on the execution of aggressive investment in its existing hospitals. While execution risk is low, a significant portion of the opportunity is already reflected in the price. Hence the broker has a Hold rating and $2.30 target.

Risks? Broker concerns centre on any further deterioration in pathology through market share losses, collection centre rent increases or reimbursement cuts, or reduced volumes if co-payments were to be legislated. From the hospital perspective, any reduction in affordability of health insurance premiums could result in lower admissions to private hospitals.

In terms of pathology operations, the economics are largely based on scale. Goldman estimates Healthscope has 12% of the revenue share in the market in FY14 compared with the top two controlling 70% combined - that is Sonic Healthcare ((SHL)) and Primary Health Care ((PRY)). Healthscope lacks scale in some states and, partly for this reason, its margins have been under pressure in recent years. Goldman notes the company has restructured and scaled back in NSW. Its market share in Victoria and South Australia is on a more equal footing to its peers and the broker acknowledges Healthscope is a much stronger competitor in these two markets.

Domestic pathology operations have struggled since the collection centre deregulation in 2010 and, while the business has been pared back to sustainable levels, with further funding pressure it likely offers only modest earnings growth potential, in Deutsche Bank's view. Goldman Sachs concurs. Australian pathology is expected to be the more difficult environment, suffering rising collection centre rents and potential further losses in market share. As a result, Goldman maintains relatively flat earnings forecasts

International pathology is expected to deliver mid single digit growth in revenue and earnings. Healthscope operates laboratories in New Zealand, Malaysia, Singapore and Vietnam. The large majority of offshore revenue comes from New Zealand, with most of its business under long-term contract with district health boards.

Merrills notes Healthscope was historically valued at a multiple discount to Ramsay because of several issues with operating performance and perceptions. On the acquisition of Affinity Health by Ramsay and subsequent divestment of hospitals to Healthscope, as required by Australia's Competition and Consumer Commission, the broker observed a shift in the rate of development and level of investment, prior to the private equity acquisition. This prior investment is likely to be supportive of the forward growth strategy now the stock is newly listed on ASX.
 

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- IVF growth falls short of prospectus
- Diversity provides relief
- Solid growth forecasts
- Selling overdone
 

By Greg Peel

Virtus Health ((VRT)) is best known for offering assisted reproductive services (IVF) in Australia, Ireland and, more recently, Singapore, through its chain of “The Fertility Centre” clinics. The company nevertheless also offers day surgery and diagnostic services.

Virtus listed on the ASX in July last year and yesterday posted its maiden full-year earnings report as a listed company. The stock took off after listing to become an immediate star before posting a disappointing first half earnings result, from which its share price ultimately recovered. Yesterday’s result was nevertheless another disappointment.

Heading into the result, the market had already started to worry again about this potential high-flyer when Primary Health Care ((PRY)), largely a medical centres and pathology services franchise, announced it was also entering into the IVF game in NSW. This is not a good time for Virtus to be “missing” on its full-year result.

VRT dropped close to 4% yesterday and is down again today as we speak, around the $7.70 mark. The stock opened on Monday at $8.20 and had peaked at around $9.00 post offering late last year. Is the game up for this star debutant?

No, say Macquarie and UBS.

Macquarie was not surprised Virtus fell short of the IVF cycle growth guidance provided in its prospectus, given industry trends have been running at a lower rate. As it was, Virtus still posted 3.9% growth against 2.9% industry growth, but the “miss” is what the market homed in on. Indeed, the result fell short of Macquarie’s numbers on all of profit, revenue and earnings, but then the broker was caught out by higher than expected interest and tax expense.

The result was in line with UBS’ forecasts, highlighting the benefits of what the broker calls the “portfolio effect”. As noted, Virtus also dabbles in day surgery, which saw 9.4% growth, and diagnostics, which saw 17.5% growth. And further diversification is provided geographically. Margins were weighed down in FY14 by the cost of the company’s expansion, but while Virtus is still pursuing M&A opportunities in the UK and EU, the broker expects margins to at least stabilise in FY15 as the company begins to transition from this expansionary period.

Brokers concede the Primary effect will likely continue to weigh on market sentiment, even though there is a demographical disparity to consider. Virtus provides full service to the higher end of the IVF cohort – those couples who can afford to pay for more than one cycle until a result is achieved – while Primary has come in at the low end, bulk-billing couples who can really only afford to give it one shot, so to speak. Indeed, early data from Primary indicates that of 80% of candidates have tried IVF and have either failed or run out of money, while 20% are new quartile and unlikely to impact on Virtus.

Indeed, on the basis that any advertising of medical services “floats all boats”, Virtus noted a pick-up in its own enquiries when the news hit the headlines of Primary’s new bulk-bill service, UBS notes. Macquarie nevertheless warns that full service volumes and subsequent Virtus price increases may still come under pressure from the aggressive new competitor.

UBS’ response to the Virtus result is to lower its price target to $9.50 from $9.75, but the broker maintains a Buy rating on the back of a forecast compound annual earnings growth rate over three years of 14.7%, a 70% or more premium to the All Industrials average, and the fact the stock’s PE multiple has now fallen well below its peak. UBS believes competition concerns are overdone and FY15 prospects are underappreciated.

Macquarie has looked past the disappointment of the prospectus “miss”, having expected this anyway, and highlights 7% organic sales growth in FY14 and 10% organic earnings growth. Throw in a 3.4% yield on the announced dividend, fully franked, and the broker suggests a 16.5x forward PE looks attractive, and thus maintains Outperform.

UBS and Macquarie are the only two FNArena database brokers who have initiated coverage on Virtus to date, so it’s two from two Buy (or equivalent) ratings. Macquarie has “rolled forward” its discounted cash flow valuation (added FY17 now FY14 is in the bag) which leads to a target price increase to $10.30 from $9.80, leaving a consensus of $9.90.
 

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-Guides to 15% FY15 earnings growth
-Little room for disappointment
-Hizentra driving Ig portfolio
-Renewed buy-back
 

By Eva Brocklehurst

Blood plasma and vaccine supplier CSL ((CSL)) delivered strong growth in specialty products in FY14, foreshadowing another buy-back of up to $950m later in the year. Guidance  for 15% growth in FY15 underscores the strength of the business and serves to douse growing concerns regarding the company's ability to withstand competitive pressures. Or does it?

CSL reported profit growth of 11%. CSL Behring divisional revenue grew 10%, a surprise to many brokers. Macquarie considers this result should put to rest fears of a slowdown. In the lead up to the result there were mounting concerns about a return of competitors to the market and pricing pressure for Immunoglobulin (Ig). Weak results from European competitors furthered fears regarding CSL's ability to continue with its growth trajectory. Macquarie hails the results as a sign many of these concerns are difficult to justify. With the stock trading at a 12% premium to the market versus its longer term average of 36%, Macquarie considers it increasingly attractive.

JP Morgan also believes CSL has silenced the sceptics. Sales accelerated in the second half largely from lumpy contracts but still highlighted strength in Ig and albumin. Earnings guidance reflects underlying growth of 11%, adjusting for US antitrust class actions. This is a strong signal, in JP Morgan's view, considering guidance incorporates expectations regarding Baxter's HyQvia launch in the US. Gearing appears to be 1-2 years off the target and this suggests the buy-back may be scaled back, although JP Morgan suspects an upward revision of the target gearing is more likely.

FNArena's database contains five Buy ratings. There are two Hold ratings. These are CIMB and Deutsche Bank, yet to report. Citi is the lone Sell rating.

Citi found CSL Behring revenue gains as positive but was disappointed with the divisional margin, down a surprising 40 basis points. The broker considers the FY15 outlook is reasonable but cannot easily dismiss competitive pressures. On this front, Citi notes the launch of Octagam 10% in the US, the launch of HyQvia and improving supply from Baxter. Haemophilia competitors are Eloctate and Alprolix, and there are a range of other coagulation products. The broker expects FY16 growth of just 4% to account for these pressures. On a 12-month forward price:earnings estimate of 22 times the broker considers the stock expensive, given the forecast trajectory. There is little room for disappointment in Citi's opinion. Hence, the Sell rating.

Hizentra appears to be a significant driver of the Ig portfolio. Competitor product HyQvia poses a threat in the short term but the potential use of Hizentra in Chronic Inflammatory Demyelinating Polyneuropathy (CIDP) presents a more material opportunity over the medium term, in Credit Suisse's opinion. While Chinese consumption of albumin shows no signs of slowing the broker does expect growth to temper over time.

The company has enjoyed several years of superb growth. Tailwinds may be abating but BA-Merrill Lynch considers growth remains strong enough, reflecting the company's resilience irrespective of market conditions and competitive pressure. The breadth of geographical and product reach serves CSL well and creates a stock worthy, on a risk-adjusted trajectory, of a Buy call, in the broker's view. Expanding margins remain intact and, given the second half growth was mostly volume driven, Merrills is confident the company will leverage this into FY15.

The company's track record stood the test again and UBS remains confident the new CEO can continue to deliver. The renewed buy-back adds 1.2% to the broker's FY15 earnings per share forecasts. UBS continues to rate CSL as a core portfolio holding. The company will submit its long-acting rFIX for regulatory approval in coming months and while the company does not expect a contribution in FY15, UBS notes the product portfolio canvases a US9bn market. Moreover, with gross margins over 75% the products carry potential for material earnings upside.

On FNArena's database the consensus target is $74.82, suggesting 7.3% upside to the last share price. This compares with $72.95 ahead of the results. Targets range from $62.86 (Citi) to $83.00 (Macquarie).
 

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-Upgrades contribute 15% in H2
-Top line growth elusive
-Reverting to lower pay-out ratio
-Stock is expensive

By Eva Brocklehurst

Cochlear ((COH)) surprised the market with a better performance in the second half of FY14, at least in terms of delivering on earnings guidance. In the matter of market share the company's position continues to deteriorate. Brokers also remain concerned about the growth of the key cochlear implants business, as new products and upgrades appear to be driving sales momentum.

While the rate of growth was slower than historical levels of 5-10%, BA-Merrill Lynch observes one positive aspect in that this shifts the focus onto the rate of growth, rather than market share loss. A return to growth mitigates an Underperform call but the broker believes a Buy call is equally challenging. Hence, Merrills sticks with a Neutral rating. Cochlear benefited from increased upgrade sales emanating from the N6 processor launch.

The company revealed for the first time that upgrades contributed around 15% of revenue in the second half and the broker believes this was a material contributor to gross margins. Merrills expects upgrades to remain a key growth factor and earnings should grow faster than sales. The broker remains optimistic regarding Cochlear's direct clinic involvement, that is its Melbourne Cochlear Care Centre, but does not envisage the current level of spending on this growth initiative will have much impact on the status quo.

Deutsche Bank is disappointed with the fact the company continues to lose market share. The broker wants evidence that new products are providing a meaningful boost to earnings. Sales momentum was disappointing but the broker acknowledges lower operating costs, in part reflecting low costs associated with the Chinese tender sales, allowed profit to beat forecasts. Second half revenue growth was a solid 16% and Deutsche Bank expects this momentum should carry into FY15, supported by upgrades, new products and associated regulatory approvals, particularly in the US.

Relative to Macquarie's expectations, sales were only marginally ahead in FY14 with the main driver of the better-than-expected performance being gross margin and a lower tax rate. The broker's primary concern is that top line growth is elusive and inconsistent with the stock's price/earnings ratio. Moreover, the company announced the dividend pay-out ratio for FY15 will revert to historical norms of 70%. This equates to $1.69 in FY14 in Macquarie's calculations, a 33% reduction from FY14. The broker suspects this will raise further concerns about the growth outlook.

Management has signalled investment in technology and improved patient outcomes as its key strategy for growth but Macquarie is not overly confident. The rate of innovation in cochlear implants is slowing and product features are not a large driver of industry growth, so the broker struggles to accept the company's ongoing high expenditure in research and development. Macquarie would prefer to see development of an effective channel to reach the large under-penetrated adult segment but accepts this seems to be a low priority for management.

Sales were ahead of Citi's expectations, sufficient to meet guidance. The broker liked the result after a disappointing first half, although acknowledged growth in the key cochlear implants is still missing. Market share appears to be stabilising but Citi wonders whether this can improve, given ongoing competitive pressures. The broker does not believe N6 upgrades, which will drive a material improvement in sales and profits for FY15, are enough. Implant units will need to grow to drive sales and earnings thereafter. Citi, too, would like to see new approaches regarding penetrating the adult segment. The broker considers the stock expensive, particularly in view of the risks, including US Medicare ceasing to cover acoustic implants or patent litigation that is unfavourable to Cochlear, as well as the market share onslaught from competitors. Citi retains a Sell rating.

JP Morgan is most encouraged by the momentum in processor upgrade sales and gross margin improvement. Still, the most valuable part of the business is the implants and here the company lost market share. The broker believes the company could be at the point of delivering more impressive growth numbers, assuming product releases are a success, but it is too risk to take a punt on this basis because the stock is expensive. An Underweight rating is retained.

UBS revises up forecasts to take account of stronger contributions from upgrades but maintains the consensus profit target of $140.2m for FY15 is a stretch. Moreover, the company's price/earnings premium of 80% to the ASX Industrials ex Financials comes despite a three-year decline in earnings growth. The broker notes cyclical upgrades deliver only a short-term boost to earnings, while the success of the N6 launch is not yet apparent. CIMB retains a similar view, noting volatility and a lack of earnings visibility are risks that are not adequately reflected in the share price.

Cochlear entered its result release as the most shorted stock in the market by a margin, at 17.8% shorted (See FNArena's weekly Short Report). Those short positions had to be covered in the wake of the results and the resultant buying produced a subsequent rally in the share price. On FNArena's database there are no Buy ratings, just two Hold and six Sell ratings. The consensus target is $57.78, suggesting 17.8% downside to the last share price, and compares with $51.86 ahead of the results. The targets range from $49.49 (Citi) to $69.65 (Merrills).
 

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-Gross margin still strong
-Waning impact of CB introduction
-But questions over sales growth
 

By Eva Brocklehurst

Changing purchasing patterns in the US meant ResMed's ((RMD)) FY14 results ended up below broker expectations, particularly for mask sales. The sleep disorder specialist's operating environment was challenged by timing issues, with the usual seasonal strength of the fourth quarter absent because of price cuts in the third quarter, which meant some large customers brought forward their bulk purchases.

Despite the price reductions, ResMed maintained a strong gross margin of 62.9%, ahead of most broker forecasts. The weak fourth quarter was tolerable for UBS because of the FY15 outlook - easier comparables and a new flow generator coming to market. The key metrics remain robust and UBS considers any weakness as a buying opportunity ahead of the launch of the flow generator.

Discounting had an impact on margins but this was mitigated by cost control, in JP Morgan's view. A suite of new products in masks, flow generators and ventilators is expected to address the decline in US market share and restore growth. That said, JP Morgan finds little evidence that market share decline in masks has been turned around yet. Considering the new product releases, the broker believes it is imperative there is an improvement in mask volumes over the next six months. Flow generator sales also disappointed but the broker accepts the explanation that customers are holding off until the next generation of products. JP Morgan expects, as the fourth quarter of FY14 was robbed by a pulling forward of inventory to the third quarter, this should make sales in the first quarter of FY15 a more reliable indicator.

Morgan Stanley remains comfortable regarding long-term volume and ResMed's dominant market position. The broker's investigations suggest mask growth may be positively affected by the launch of the AirFit range but the company disappointed in the June quarter in this area, reflecting price pressure and market share loss. Moreover, Morgan Stanley is not sure that future pricing will not be affected by round three of the US competitive bidding process.

Competitive bidding remains disruptive to the company's volumes, in Credit Suisse's opinion. Reduced Medicare reimbursement appears to have caused the durable medical equipment (DME) entities to sustain lower inventory levels. As is the case with other healthcare sub-sectors that have moved to a just-in-time pattern for orders, Credit Suisse does not envisage a purchase "catch up" in FY15. The speculated launch of the next flow generator platform, which did not eventuate in the June quarter, may also have played role in reducing sales, Credit Suisse suspects. The broker has reduced earnings forecasts by 5%, because of lower US sales growth rates, and considers the stock fairly valued.

Even allowing for the changed sales pattern, Deutsche Bank remains concerned about the decline in US masks sales. Rest-of-the-world sales were up 5% on an FX-adjusted basis. Gross margins also surprised the broker on the positive side and this is attributed to a lack of price discounting in end-of-quarter deals. Cash flow was strong but was largely driven by a large increase in payables, supporting a working capital uplift. This eventuated despite inventory and receivables also rising and Deutsche Bank suspects this situation is unsustainable.

CIMB found gross margins held up well, product mix was supportive and so were manufacturing efficiencies and FX. The slight margin decline reflected a more stable pricing environment and, with a product portfolio that is stronger than ever, sales weakness is not overly worrying CIMB at this point in time. Citi expects growth to improve in FY15 as the impacts from introduction of competitive bidding in the US start to wane and new products gain traction. Citi believes underlying market demand for flow generators is still growing and a return to double digit revenue growth in the second half of FY15 is likely.

On the FNArena database there are six Buy ratings and two Hold for ResMed. The consensus target is $6.03, which suggests 13.9% upside to the last share price. Targets range from $5.50 to $6.97.
 

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