Portfolio Update – Purchase of CSL Limited (ASX: CSL)

By May 13, 2022Portfolio

Across client accounts, we have bought CSL Limited (ASX: CSL), the global market leader in blood plasma collection and distribution.

We are positive on the long-term outlook for CSL for the following reasons:

  • Over the last 2-3 years CSL has seen minimal share price movement. This is an indication that CSL has been growing into their multiple and delivering on market expectations. This track record provides confidence that CSL can continue to deliver on earnings growth despite their valuation coming off as a result Covid headwinds.

  • The Covid headwinds CSL faced had the most material impact on their largest business segment Behring. Behring margins suffered during COVID-19 as the business struggled to attract donors and the cost of collecting plasma increased. We are confident supply conditions are normalising and expect CSL to push through price increases to regain margins.

  • Tying back into CSL’s ability to deliver on earnings growth and develop an impressive product pipeline, is CSL’s world-class management. CSL’s CEO Paul Perrault has a tenure of almost two decades at CSL. We believe Paul and CSL’s other executive who have a track record of delivering on the firm’s expectations will continue to do so going forward.

  • CSL’s is a non-cyclical business, allowing it to perform regardless of economic conditions. This will provide the portfolio more stability, acting as more of a defensive stock selection. This acquisition is aligned with our ongoing effort to reduce portfolio volatility in an unstable environment.

The purchase of CSL has been funded via the Sale of Ramsay Healthcare (ASX: RHC). Ramsay is currently subject to a takeover offer, and we believe the opportunity cost of waiting for the takeover process to complete is too high given current market opportunities.

 

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Prepared by:
EP Financial Services Pty Ltd
ABN 52 130 772 495 AFSL 325 252 (“ELSTON”)
GPO Box 2220
Brisbane Q 4001