Breathing device maker ResMed Inc (ASX: RMD) was founded in Sydney, but is now based in California which makes the company’s listing on the S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) differ slightly to other listed companies.
Here are three things every ResMed investor should be aware of:
1. ASX shares are scaled 10:1
ResMed’s listing on the ASX comes in the form of what’s called a CHESS Depositary Instrument (CDI). A CDI represents just a slice of each full share listed on the NYSE. Like a full share, they represent a unit of ownership, but are scaled at 10:1.
One implication of this is that any ‘per share’ metrics found in ResMed’s financial reports need to be scaled accordingly. For example ResMed’s basic earnings per share in 2013 were US$2.15, so for investors of CDIs this number needs to be divided by 10 to give the equivalent per share amount (in this case U.S. $0.215 per CDI).
2. ResMed undertakes an active program of share repurchasing
For more than 10 years ResMed has undertaken an active share repurchase program as a way to return cash back to investors and also as part of the company’s long-term capital management strategy.
Last week ResMed’s board of directors agreed to extend the program to buy-back up to 20 million shares on the open market, around 14% of the current outstanding shares.
Investors should be aware that the program can artificially increase earnings per share and so should be sure to check overall change in earnings each year. Fortunately, ResMed has grown net earnings from US$227 million to US$307 million over the last three years, growth of 35%.
3. There is still big growth potential
ResMed’s revenue in the U.S. dropped by 2% for the quarter to 31 December 2013, as a result of increased competitor activity and changes in the way the U.S. Medicare system funds healthcare, spooking some investors.
However the company still sees growth ahead both inside and outside the U.S. This will be supported by new product launches, as well as acquisitions made in Europe in late 2013 which will support sales growth.
ResMed has a number of nuances which make it different to owning shares in other ASX listed companies. Knowing the form the company’s listing takes, its capital management plans and long-term growth potential will help you understand ResMed better going forward.
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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.
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