CSL Lim­ited ( CSL)

Jason Fit­tler, Grow Your Wealth

Townsville Bulletin - - NEWS -

CSL de­vel­ops and man­u­fac­tures vac­cines and anti- venoms, but its pri­mary rev­enue stream ( 96 per cent) is blood plasma and blood plasma de­rived prod­ucts. The blood plasma prod­uct mar­ket has been dom­i­nated by three ma­jor play­ers for the last 20 years, CSL be­ing the largest.

For another com­peti­tor to en­ter the mar­ket would be very dif­fi­cult. Col­lec­tion re­quires an ex­ten­sive net­work of fa­cil­i­ties, multi- bil­lion­dol­lar plants and com­pli­ance with six sep­a­rate reg­u­la­tors as well as a maze of patents.

Scale and years of R& D have given CSL the in­dus­try’s low­est cost base, al­low­ing them to main­tain high profit mar­gins while dom­i­nat­ing mar­ket share. CSL have been able to grow earn­ings con­sis­tently over the last decade and av­er­age a re­turn on eq­uity of over 40 per cent.

Given the de­fen­sive na­ture of core earn­ings and CSL’s con­sis­tent track record, CSL jus­ti­fi­ably trades at a pre­mium to the ASX ( P/ E 28x). Med­i­cal de­vel­op­ments pro­vide fur­ther po­ten­tial for fu­ture up­side. The re­cent dip pro­vides a good en­try point into a qual­ity long term hold­ing. We value CSL at $ 106.90, im­ply­ing price up­side of 22 per cent+.

CSL is a long- term growth story which is look­ing like good value at the present lev­els. It would suit value in­vestors with a 5- year time frame. At the cur­rent price ac­cu­mu­lat­ing a po­si­tion in this com­pany makes sense.

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