By Jason Fittler
CSL has two operational divisions:
'CSL Behring' – develops and markets blood plasma derived therapies, which find diverse applications for; blood coagulation disorders, immune deficiencies, cardiac surgery, organ transplantation and burn treatment.
'BioCSL' - develops and markets biological products, vaccines, ant venoms and prescription pharmaceuticals.
CSL disappointed when it announced first half FY14 earnings failing to live up to the 9% growth most analysts had predicted. This saw the share price fall some.
This creates an opportunity if you subscribe to the thesis that this was a once off occurrence and is out of character for a company that has averaged EPS growth of 15.4%pa over the last 4 years.
The company is now the cheapest it has been in a while, cheap in the relative sense, when you consider that the company’s earnings are both highly defensive and have a capacity/track record for strong growth, and that the company consistently earns a return on equity above 25% pa.
CSL products are in no way discretionary. This creates inelastic demand.
As such CSL is one of the most defensive companies on the ASX.
CSL’s correlation to the fluctuations of the market is low (beta 0.2), making it a useful portfolio component to offset falls in the market.
Changes to government regulation pose the biggest threat to CSL. They may impose regulation on the basis that plasma products are an essential resource and lower reimbursement rates to pharmaceutical producers.
The analyst consensus is that CSL will ‘Outperform’ the market going forward.
Dividend yield is forecast to be 1.9%, relatively low as CSL has a preference for pouring money into share buy-backs and R&D instead.
CSL is suitable for growth-orientated investors looking for a company that can perform regardless of the economic environment.
For more information about CSL Limited (CSL) please contact us on 07 4771 4577.