Cochlear Trading Update in Line With Expectations, No Change to Fair Value Estimate

The trading update provided by wide-moat Cochlear was broadly in line with our expectations and we make no changes to our net income forecasts of AUD 92 million for fiscal 2020 and AUD 40 million in fiscal 2021. However, we update our shares on issue to factor in the increased size of the share purchase plan, or SPP, to AUD 220 million from AUD 50 million originally (as outlined in our note on March 25, 2020) and this has the effect of reducing our five-year EPS forecast CAGR to 5.4% from 5.8% prior. However, because the SPP was priced near our unchanged AUD 129 fair value estimate, the increased equity raising has minimal impact on our valuation. Shares screen as overvalued at current levels.