CSL is a global company that develops and manufactures biopharmaceutical products mainly derived from blood plasma. It also develops and manufactures influenza vaccines. CSL’s key markets are the United States (48 per cent of revenue) and Europe (25 per cent of revenue), CSL’s market capitalisation is around $A100 billion and CSL is the 4th largest company listed on the ASX.
CSL has been one of the strongest performing Australian companies since its public listing on the ASX in 1994. For example, the average annual growth in CSL’s share price has been over 25 per cent per annum since being publicly listed in 1994.
Looking forward over the longer term, CSL has a positive outlook.
- Currently, CSL is ranked number 1 in global plasma therapies (a $US30 billion global industry and CSL has only two other global competitors) and number 2 in influenza vaccines (a $US6 billion global industry).
- CSL has achieved economies of scale and has a very strong competitive position in both markets. Additionally, both industries have very high barriers of entry, reducing the likelihood of further competition in the future. An example of CSL’s competitive position is that it is the most efficient in the United States market at collecting plasma which enables it to keep its costs at industry best practice.
- CSL is expanding production facilities located at Broadmeadows in Victoria and Kankakee in the United States as well as elsewhere. This reflects growing demand partly stemming from the aging population and a growing proportion of the population having access to high technology medicine.
- CSL spends around 10 per cent of its revenue on research and development ($US702 million in 2017-18). It has a portfolio of projects that could provide “meaningful” earnings over the next decade. An example is CSL 112 which is a product targeting cardiovascular disease.
- The Asian region represents only around 9 per cent of CSL’s total revenue. Consequently, this region provides CSL with opportunities for further growth. For example, as part of its Asian strategy, CSL announced on 21 June 2019 a change to its distribution model in China for albumin (blood) products.
- CSL’s influenza business has both egg-based and cell-based manufacturing facilities (the two ways to manufacture influenza vaccines). CSL acquired a manufacturing facility located in the United Kingdom in 2015 and the business was loss making (over $US200 million). The business was earnings positive FY18 and has potential for significant earnings growth over the years ahead.
CSL is of interest to investors seeking to acquire growth stocks. However, it is not cheap, typically trading on a PE ratio in the low to mid 30s. It may not be of interest to investors seeking income as it typically trades on a dividend yield of 1 to 2 per cent and the dividends it pays are unfranked.
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