LOGIN
REQUEST WALKTHROUGH
search
times
New call-to-action

Tags

See all

Articles

CSL Growth Story: Is it one for the Future?

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

CSL Limited (ASX: 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 Limited Share Price

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.

 

Should you 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 un-franked.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute "research" as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

 

New call-to-action
New call-to-action

Company Articles

Looking for more Stock Recommendations?

Fill in your details to receive our special report: Top 3 Income Stock Recommendations for 2020.