ResMed’s Connected Devices Keep Everyone Hooked; Raising FVE to AUD 14.90 and USD 104.00

We raise narrow-moat ResMed’s fair value estimate to USD 104 from USD 101 or AUD 14.90 from AUD 14.40 for the Australian listing. The increase is a function of tempering our medium-term sales forecasts offset by lowering our cost of equity assumption to below average based on a reassessment of the resilience and low systemic risk of the business. ResMed’s strategic direction of creating connected devices that allow patients, medical practitioners and payors to get both clinical and compliance data is key to our view the company will further entrench itself in the respiratory devices market. The connected respiratory device is taking on increased importance as reimbursement levels in France are linked to evidence of patient compliance. We expect this to spread to other geographies and currently only ResMed and key rival Philips have connected products. As such, we factor market share gains into our 8.4% five-year CAGR revenue growth assumption, ahead of estimated market growth of 6% to 7%.