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CSL

Why CSL Has Been Shooting The Lights Out This Year?

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 (ASX: CSL) has been one of the best performers on the ASX this year, accounting for ~20% of the last 1,000-point rally in the ASX 200. The company is up 55% in the past 12 months, and recently updated the market on their R&D budget. CSL announced to market that they are trying to develop a new treatment for severe asthma, which would be sold to a target market of 20m people. The company has passed phase 1 trials on this new treatment for Asthma, and it is one of the most promising future treatments under development. With asthma killing 1,000 people a day, the benefits and potential revenue from treating more serious forms of the illness is larger than most people realise. This has supported the rally to $280, and the company may be the first Aussie stock to hit $300/ share.

CSL - LIGHT OUT THIS YEAR

CSL has rallied over 55% in the past year on the back of successful management and earnings beats

CSL has a strong influenza business that provides a continuous revenue stream, given that the virus mutates and requires new flu vaccines each year. The firm’s competitive advantage is having a world leading research team that can develop new vaccines, get them to market and patent them faster than competitors. This enables the company to get more sales, which produces more research funding and enables the company to continually attract top talent.

The company has maintained its growth record by continually investing in new technology and staying at the forefront of medical innovation. CSL has recently made heavy investments in developing gene therapies, which are widely believed to drive the next wave of medical advancement. They also have a business unit, CSL Behring, that makes specialty biotherapeutics for people with serious medical conditions that are based on blood plasma. This business is more diverse than the CSL’s influenza business, making it a little harder to predict on a year to year basis. This resulted in a result which disappointed the market a couple of months ago, causing a modest selloff and holding the share price down. Nevertheless, most commentators believe that update to be a temporary blip and do not expect the business to have a string of downgrades. The market awards the company a high PEG multiple because it’s a quality business with sustainable competitive advantages, non-cyclical earnings and a competitive moat.

 


 

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.

 

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