Short & Long Term Positives For CSL

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This story features CSL LIMITED.
For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Chris Shaw

Since its recent 3-for-1 share split blood products group CSL ((CSL)) has been a little out of the news but as ABN Amro and UBS note there are still positive developments occurring with the company.

UBS has focussed on the shorter-term and points out its latest pricing survey shows ongoing increases in IVIG prices in both the US and European markets. While supply in the US market remains adequate the broker notes there are some shifts in market share occurring according to when new collection centres are being opened.

Looking out over the next year the broker sees scope for some lumpiness in the market as the new centres start up, but the pricing outlook suggests further gains of up to 5% in IVIG prices, this after gains of around 13% over the last year.

Citi notes industry comment shows plasma pricing in Europe is also strong, which it suggests will support the company’s earnings outlook. The broker continues to rate the stock as a Buy, while UBS rates it as Neutral with a slightly higher price target of $35.41, up from $35.11.

ABN Amro has focussed more on the longer-term outlook but the result is the same in that the broker has lifted its price target by almost 8% to $34.50.

The broker also notes industry reports that suggest the company is in Phase III trials of a second generation HPV vaccine, which if successful would boost royalties in a few year’s time.

The new vaccine is thought to be more effective against cervical cancer, protecting against 80% of all cervical cancer against the 71% protection being achieved currently. This would generate higher royalties, with the company currently earning higher royalties from Merck than from GlaxoSmithKline.

The earnings impact is unlikely to become evident until around FY12, with the broker lifting its forecasts for that year by 7% and in FY13 by 5%. In conjunction with an increase in its valuation based on comparable healthcare multiples this supports the broker’s increase in price target.

It isn’t enough to cause the broker to change its Hold rating, the FNArena database showing the stock is now rated as Buy three times, Accumulate once and Hold six times. The average price target on the stock is $35.47, up from $35.12 prior to the latest revisions.

CSL shares today are weaker in line with the broader market and as at 1.10pm were down 46c at $32.55.

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