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15 September 2020 | Buy

COH: Listen up, opportunity knocks

BUY  –  Cochlear Limited (ASX:COH)

Cochlear Limited (COH) is the global leader in premium implanted hearing aid technology, selling devices around the world that are widely considered the best and most reliable due to their unique proprietary technology.

COH’s recent US FDA approvals for devices that can be monitored and maintained over cloud-based software shows it’s at the forefront of technology in its sector.

Unfortunately, the COVID-19 pandemic has led to restrictions (delays) on elective surgeries, impacting short term cash-flows/profits. Prudently, the company raised fresh equity to bolster an already conservative balance sheet to fund help fund future growth.

While the implanting of hearing aids has been considered elective in many countries – and consequently patients have been unable to undergo operations as hospitals have been prioritising COVID-19 activities – and patients have avoided non-emergency hospitalisation, the reality is that the majority of these hearing-impaired patients will still require an implant.

More so than many discretionary industries, demand (sales) in critical healthcare has merely been delayed, not lost, and recent anecdotal reports suggest that a very large backlog of implant demand has built up and medical professionals in the industry are beginning to plan a mass-scale return to operations, with surgery numbers as much as double the ‘normal’ level once fully open.

Since delivering better than expected half-year results in mid-August, showing excellent cost controls and a moderate recovery in demand, COH shares have retreated some 14% amidst a minor market pullback in recent weeks. We see this as an excellent opportunity to add to your portfolio, in what is a world-leading hearing aid (Cochlear implants) developer, at very attractive prices ahead of a strong recovery expected in late 2020 and 2021.


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