skc
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Well I might stick with the dog. It was a good dog. The chick was just something from page 2 of google image.
Anyway - back on topic.
COH - Cochlear Limited
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Well I might stick with the dog. It was a good dog. The chick was just something from page 2 of google image.
Anyway - back on topic.
McCoy Pauley
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I'm expecting a tumbling share price today. The AFR has an article (at least in its online version) reporting on Nurotron Biotechnology gaining approval from Chinese regulators to sell cochlear implants to children under the age of 6, which apparently gives it the right to compete for a government tender in August.
http://www.afr.com/p/business/companies/approval_to_chinese_bionic_ear_maker_8WdNPyRVyUtQXt1HluXO8K
http://www.afr.com/p/business/companies/approval_to_chinese_bionic_ear_maker_8WdNPyRVyUtQXt1HluXO8K
skc
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Looks like the market read your post today!
Don't you hate it when you are right but too quick for the market?
McCoy Pauley
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Haha, yes. I suppose I could have used the opportunity to lighten my holding but I didn't.
I understand that COH is slated to report full-year earnings tomorrow morning. It'll be interesting to see if its guidance released in early June is met or whether there's been a further deterioration in the second half of FY13. COH historically tends not to give guidance for the forthcoming financial year, but I wonder if this will be the report where Dr Roberts breaks their usual silence, given that competition is growing and some shareholders will be worried about COH's future growth prospects.
McCoy Pauley
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Report's out. NPAT for the year right in the middle of their guidance released in early June at $132.5 million. The balance sheet is interesting. Less cash on hand and higher inventory (value almost 30% higher in fact compared to FY12) and receivables. That could suggest that COH is finding it more difficult to sell products and the customers to whom they sell products are taking longer to pay (though provisions dropped 20% YoY).
Operating cashflow dropped precipitously as well, from $168 million to $70 million in the space of a year, with receipts from customers down 8% and costs paid to suppliers and employees up 8%.
I'd say that it's probably in line with market expectations (haven't checked the market reaction) but COH has some work to do.
ETA - share price down just over 2% this morning. Interesting to see the media reaction. According to SMH, COH's profit has "slumped" whereas, according to Business Spectator, COH's profit has "surged".
http://www.smh.com.au/business/earn...fit-slumps-on-us-weakness-20130806-2razh.html
http://www.businessspectator.com.au...hlears-full-year-profit-surges#comment-393201
Operating cashflow dropped precipitously as well, from $168 million to $70 million in the space of a year, with receipts from customers down 8% and costs paid to suppliers and employees up 8%.
I'd say that it's probably in line with market expectations (haven't checked the market reaction) but COH has some work to do.
ETA - share price down just over 2% this morning. Interesting to see the media reaction. According to SMH, COH's profit has "slumped" whereas, according to Business Spectator, COH's profit has "surged".
http://www.smh.com.au/business/earn...fit-slumps-on-us-weakness-20130806-2razh.html
http://www.businessspectator.com.au...hlears-full-year-profit-surges#comment-393201
skc
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There's supposed to be some news about the last batch of Chinese govt implant tender this week. So may be something in the background that the company didn't announce.
Thanks, skc. I hold so I hope there might be some follow through in the next few days. Cochlear is apparently the fourth most shorted stock in XJO, so if they manage to claw back market share there's plenty of room for improvement in the share price.
COH has become gambling at this point.
Wonderful stock historically, but downright bleak now. Growth appears less likely and a P/E of 26 would only be acceptable if significant future earnings were anticipated.
Revenue was 810m in 2011, 779m in 2012 and 753m this year.
Profit was 180m in 2011, 158m in 2010 (excluding recall costs) and 133m this year.
Debt was 63m in 2011, 66m in 2012 and 170m in 2013.
Cash was 732m in 2011, 68m in 2012 and 53m in 2013.
Inventory, receivables and debtor days also jumped in 2013, while net profit margin fell.
So the worries are: (i) Revenue and profit are down considerably. (ii) COH is finding it harder to move its products and be paid for them. (iii) Despite its high ROE, the company paid out 100% of profits and added borrowings to fund the final dividend. It is now net debt. The dividend appears to be a ploy to support the share price. (iv) COH is facing extreme competition from several cheaper implant makers.
I thought COH would survive the recall with its reputation intact, but perhaps it was dented. AFR reports that Merrill Lynch reviewed the global impact market in 2013 and put COH's share at 54%. It was only two years ago that the company boasted having 70%.
The high cost of manufacturing in Australia makes COH the most expensive producer in the world. This is unlikely to improve given the dollar's recent spike and the AMWU's legal moves to force a collective agreement on the company. Med-El and Advanced Bionics seem to be producing quality implants at cheaper prices and this is drinking COH's milkshake (indeed, both companies won parts of the China tenders). Nurotron is an upshot Chinese competitor that sells implants at half the price of COH, and its products are now approved for adults and children in China. There is also an Indian company making moves.
Overall, far too risky for me. I would give it another look if it dips below $50.
The above is simply my opinion
Wonderful stock historically, but downright bleak now. Growth appears less likely and a P/E of 26 would only be acceptable if significant future earnings were anticipated.
Revenue was 810m in 2011, 779m in 2012 and 753m this year.
Profit was 180m in 2011, 158m in 2010 (excluding recall costs) and 133m this year.
Debt was 63m in 2011, 66m in 2012 and 170m in 2013.
Cash was 732m in 2011, 68m in 2012 and 53m in 2013.
Inventory, receivables and debtor days also jumped in 2013, while net profit margin fell.
So the worries are: (i) Revenue and profit are down considerably. (ii) COH is finding it harder to move its products and be paid for them. (iii) Despite its high ROE, the company paid out 100% of profits and added borrowings to fund the final dividend. It is now net debt. The dividend appears to be a ploy to support the share price. (iv) COH is facing extreme competition from several cheaper implant makers.
I thought COH would survive the recall with its reputation intact, but perhaps it was dented. AFR reports that Merrill Lynch reviewed the global impact market in 2013 and put COH's share at 54%. It was only two years ago that the company boasted having 70%.
The high cost of manufacturing in Australia makes COH the most expensive producer in the world. This is unlikely to improve given the dollar's recent spike and the AMWU's legal moves to force a collective agreement on the company. Med-El and Advanced Bionics seem to be producing quality implants at cheaper prices and this is drinking COH's milkshake (indeed, both companies won parts of the China tenders). Nurotron is an upshot Chinese competitor that sells implants at half the price of COH, and its products are now approved for adults and children in China. There is also an Indian company making moves.
Overall, far too risky for me. I would give it another look if it dips below $50.
The above is simply my opinion
Following up on this, COH's price looks volatile but bound between ~$57 and ~$63. Still the fourth-most shorted stock on the ASX and most brokers I can see have sell or underperform ratings.
Corrections to my last post: (i) typo in 2011's cash, it should be 72m (does not change the massive increase in debt and loss of cash recently); (ii) "global impact market" should of course be implant; and (iii) Nurotron's product is a quarter, not half, of the cost of COH's according to AFR.
Interesting that these folks have backed down from their recent spruiking of COH:
That last point is my biggest concern. It seems to me that the frequent claim that "Cochlear has the best quality" is a case of Australian exceptionalism; we want to think ours must to be better than the Swiss, Austrian, American, Chinese competitors. Some evidence to back up the assertion would be welcome but is elusive. If anybody on ASF knows the technical stuff behind implants (certainly I do not) please let us have your thoughts.
Lastly, the discussion around Nucleus 6 confuses me. Nucleus 6 is a "processor" not an implant. COH's actual implant product is many years old (the company having reverted to an old model when the 2011 one was recalled). Surely the growth aspect to COH is increasing global demand for implants?
The above is simply my opinion
Corrections to my last post: (i) typo in 2011's cash, it should be 72m (does not change the massive increase in debt and loss of cash recently); (ii) "global impact market" should of course be implant; and (iii) Nurotron's product is a quarter, not half, of the cost of COH's according to AFR.
Interesting that these folks have backed down from their recent spruiking of COH:
Motley Fool said:
That last point is my biggest concern. It seems to me that the frequent claim that "Cochlear has the best quality" is a case of Australian exceptionalism; we want to think ours must to be better than the Swiss, Austrian, American, Chinese competitors. Some evidence to back up the assertion would be welcome but is elusive. If anybody on ASF knows the technical stuff behind implants (certainly I do not) please let us have your thoughts.
Lastly, the discussion around Nucleus 6 confuses me. Nucleus 6 is a "processor" not an implant. COH's actual implant product is many years old (the company having reverted to an old model when the 2011 one was recalled). Surely the growth aspect to COH is increasing global demand for implants?
The above is simply my opinion
Im not 100% through the annual report yet... but a few things caught my eye.
Inventory levels at $131.6 Mil up 30 % Inventory days increased by about 50 days as well…
The other thing was this Otologics IP purchase… If my memory is correct, COH went guarantor for otologics in their loan (and I think we even paid for the privilege), they went bust so we bail them out to the tune of 14 Mil! And gain their intellectual property… That seems all a bit dodgey… I’m pretty sure the 14 million would have been better in our R&D department… Or distributed into our pockets!
The man responsible for the manufacture of all COH’s products has: “gained general management experience at Boral and Sunstate Cement, as well as being a consultant for Boston Consulting Group.” What does cement have to do with making hi tech medial devices that get implanted in people’s skulls... Gee I sleep well at night knowing there is NO chance of product recalls ever happening with this guy at the wheel!
Inventory levels at $131.6 Mil up 30 % Inventory days increased by about 50 days as well…
The other thing was this Otologics IP purchase… If my memory is correct, COH went guarantor for otologics in their loan (and I think we even paid for the privilege), they went bust so we bail them out to the tune of 14 Mil! And gain their intellectual property… That seems all a bit dodgey… I’m pretty sure the 14 million would have been better in our R&D department… Or distributed into our pockets!
The man responsible for the manufacture of all COH’s products has: “gained general management experience at Boral and Sunstate Cement, as well as being a consultant for Boston Consulting Group.” What does cement have to do with making hi tech medial devices that get implanted in people’s skulls... Gee I sleep well at night knowing there is NO chance of product recalls ever happening with this guy at the wheel!
skc
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Perhaps the bold part is more important.
McCoy Pauley
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At the AGM this morning, the chair, Rick Holliday-Smith, announced that COH expected its NPAT for 2013-2014 will likely be flat, with a bias towards the second half.
Unsurprisingly, the share price has dropped considerably - down almost 3% compared to an overall market gain of +1%.
For those with an AFR subscription:
http://www.afr.com/p/business/companies/cochlear_predicts_flat_profit_growth_90DgFDaX2XHGNRGsLz2pTN
Unsurprisingly, the share price has dropped considerably - down almost 3% compared to an overall market gain of +1%.
For those with an AFR subscription:
http://www.afr.com/p/business/companies/cochlear_predicts_flat_profit_growth_90DgFDaX2XHGNRGsLz2pTN
I was shocked by this, given the previous chatter from the CEO and media about Nucleus 6 driving the growth in 2014 that had been priced into COH. Bleak indeed if profit is expected to be flat even with the roll-out of an apparently amazing new product.
Also interesting was the guidance that the $1.27 dividend will continue, presumably funded by more borrowing. Several shareholders expressed disappointment about this at the meeting, management basically argued the company was going through a rough patch and they wanted to help out shareholders (i.e. precisely the point I made above about it being a plot to support the share price).
Having said that, COH held up incredibly well. It dipped at first but bounced up after ~$58. Closing price in line with the average of the last two (volatile) months. Makes no sense to me!
The above is simply my opinion
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Up drifting good for shorts now on the basis if this.
A pristine company has gone mediocre pricing itself out of the market with it's rip off products.
Eventually competition will get the better of you and this is happening to COH.
A pristine company has gone mediocre pricing itself out of the market with it's rip off products.
Eventually competition will get the better of you and this is happening to COH.
McCoy Pauley
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I agree to an extent.
I think the company handled the recall as well as it could have, but then to an extent rested on its laurels and allowed the competition to catch up and possibly even overtake it. It seems that COH is now bolstering its spend on R&D to play "catch up".
The chair didn't mention it in the transcript of his presentation to the AGM, but in the presentation slides, it's noted that COH has received approval from FDA and Europe for Nucleus 6, which is a positive, but then they go on to note that not all features will be available in the US release. This implies to me that they've only received partial approval from the FDA for Nucleus 6, which means that their best and brightest hope of recouping sales lost following the recall is diminished.
There was also nothing about COH's success (or failure) to obtain a slice of the action from the Chinese tender.
I think the company handled the recall as well as it could have, but then to an extent rested on its laurels and allowed the competition to catch up and possibly even overtake it. It seems that COH is now bolstering its spend on R&D to play "catch up".
The chair didn't mention it in the transcript of his presentation to the AGM, but in the presentation slides, it's noted that COH has received approval from FDA and Europe for Nucleus 6, which is a positive, but then they go on to note that not all features will be available in the US release. This implies to me that they've only received partial approval from the FDA for Nucleus 6, which means that their best and brightest hope of recouping sales lost following the recall is diminished.
There was also nothing about COH's success (or failure) to obtain a slice of the action from the Chinese tender.
Down a little more today but not breaking the ~$57 floor. Folks seem to be gradually realising COH has well and truly lost its darling status. Article out today with these points:
Can one ever "reclaim its position as the dominant market force" when competitors offer alternatives 75% cheaper? The coming nine months should be interesting. In a way COH embodies a lot of the problems with Australia's manufacturing and industrial relations environment. Stock remains far too risky to my eyes, but I would not be game enough to short it.
The above is simply my opinion
AFR Smart Investor 16/10 said:
Can one ever "reclaim its position as the dominant market force" when competitors offer alternatives 75% cheaper? The coming nine months should be interesting. In a way COH embodies a lot of the problems with Australia's manufacturing and industrial relations environment. Stock remains far too risky to my eyes, but I would not be game enough to short it.
The above is simply my opinion
skc
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The infringement lawsuit was filed in 2007 and there's minimal ongoing impact as the infringed patents are either expired or about to expire. The only impact is the $131m damage award which is about $2 per share (and the market priced that in perfectly today).
The bigger problem will be the earning release and their market share performance over the last 6 months.
COH is the top shorted stock on the ASX... it will be revealed soon whether the bears have got it right.
Your spot on there! that will be very interesting
While the impact of the infringement case is minimal in relative terms the fact of the matter is, COH spend an ever increasing fortune of R&D - so there should be no way we should be getting done for patent infringement...
And on top of that the CEO and KMP keep receiving their STI & LTI payments even though shareholder value is down the can.
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