Portfolio Update – Purchase of Cochlear Limited

By November 3, 2021Portfolio
Across investor accounts, we have bought Cochlear Limited (ASX: COH), the global market leader in the provision of implantable hearing solutions.   We are positive on the long-term outlook for COH for the following reasons:
   
  • It’s estimated that under 5% of people suffering from severe to profound hearing loss have a Cochlear implant, this significant level of under-penetration provides a multi-decade growth opportunity as awareness grows of the recipient and societal benefits;
 
  • COH’s annual investment in research and development is materially higher than key competitors enabling the business to lead in innovation and product development and maintain its dominant market positioning;
 
  • The Services business segment, which provides upgrades to existing implant customers, has very high switching costs providing predictable long-term annuity-style revenues;
 
  • New entrants have regulatory barriers to pass before being able to offer competing products; these barriers create long lead times and provide visibility to existing competitors.
COVID-19 has caused disruption to elective surgeries globally, reducing the number of new Cochlear implants and existing customer services during this period of heightened government imposed restrictions. Despite the disruption, COH remains a high-quality business with a majority share of a large, low penetrated market. Ongoing investment should maintain competitive advantages and market leadership resulting in above GDP revenue growth for several decades.   To fund the acquisition of Cochlear Limited (ASX: COH), we have reduced the weighting in ANZ, Sydney Airport, Westpac and unallocated cash.   As always, thank you for your ongoing support; it is very much appreciated. If you have any questions or would like more information, please contact your SBB Wealth Representative.

 

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Prepared by:
EP Financial Services Pty Ltd
ABN 52 130 772 495 AFSL 325 252 (“ELSTON”)
GPO Box 2220
Brisbane Q 4001