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Summer Series: CSL Limited (ASX CSL)

HOSTS Alec Renehan & Bryce Leske|31 December, 2020

Welcome to the Equity Mates Summer Series of 2020 brought to you by Superhero.

Over 12 episodes we dive into some of Australia’s largest and most well-known companies, as selected by you, the Equity Mates community.

In this episode, we unpack CSL – one of the market darlings on the ASX. CSL Limited is a global specialty biotechnology company that researches, develops, manufactures, and markets products to treat and prevent serious and life threatening medical conditions.

In each episode we look at:

  • A company summary
  • The industry
  • Their competition
  • The outlook and future plans
  • Key financials
  • Valuation

For some of the companies, we’ve been lucky enough to get access to the CEO, where we take some of the tough questions straight to them.

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Bryce Leske: [00:01:28] Welcome to the Equity Mates Summer Series of 2020, brought to you by superhero. Superhero are offering five dollar brokerage flat fees and also zero dollar brokerage on all ETF transactions, which is an amazing deal, Ren. But anyway, that's not why we're here. Over the next 12 episodes, we're going to be diving into some of Australia's largest and most well-known companies as selected by you. The Equity Mates community will be unpacking the company, its industry, the outlooks, and key financials, and in some instances will also be taking the tough questions straight to the CEO of the companies to do this. As always, I'm joined by my Equity Mates Ren. How's it going, bro? [00:02:06][37.8]

Alec Renehan: [00:02:06] I'm good, bro. I'm very excited for this episode. We're talking about a company that is very close to your heart. Yes. Now, unfortunately, we don't have the CEO, although he is on our wish list for twenty twenty one. So if anyone's working at this company and wants to put in a good word for us, please do. But the company we're talking about is CSL. And the reason it's close to your heart is because at the start of the year you made a bold prediction that CSL would be Australia's biggest listed company by the end of the year. At the time, Commonwealth Bank was the biggest company on the Australian stock market. And for a while there during covid, you were looking very good [00:02:47][41.1]

Bryce Leske: [00:02:48] hit 340. [00:02:49][1.2]

Alec Renehan: [00:02:50] You wouldn't shut up about it. Just kept probably texted me at least once a day, sometimes twice a day, telling me how you nailed your bold prediction. I think you had a T-shirt made. [00:03:01][11.9]

Bryce Leske: [00:03:03] You say skywriter. I did CSL up outside the side. You were [00:03:06][3.2]

Alec Renehan: [00:03:07] You were looking good. CSL were the most valuable company in Australia by a couple of tens of billions of dollars, I think at the time. Right now, at time of recording, they have slipped a little bit and Commonwealth Bank have come back a little bit. Commonwealth Bank is currently valued at one hundred and forty three billion dollars. Yeah, whereas CSL is valued at one hundred and thirty nine billion dollars. And so it is neck and neck. Things could change in a day. By the time people are listening to this episode, it may have changed. So to kick off the episode, I'm going to ask you to either walk away or double down on your bold prediction. CSL, at time of recording on the 30th of November, are currently four billion dollars less valuable than the Commonwealth Bank. Yeah, on the 31st of December or whatever. The last trading day for the ASX is in twenty twenty, which will be higher. [00:03:58][51.6]

Bryce Leske: [00:03:59] It's going to be Commonwealth, really. [00:04:00][1.4]

Alec Renehan: [00:04:01] You're walking away from bold prediction. [00:04:02][1.0]

Bryce Leske: [00:04:03] No, for the actual year long. I'm going to stick with it for that, for the episode wrap up that we do that for. [00:04:08][5.0]

Bryce Leske: [00:04:09] This is the reason being I think there's a lot of money coming into the banks at the moment with what's going on with interest rates and the broader macro pace. But anyway, we're not here to talk about that. I can't see CSL making up a four billion dollar deficit in the next 30 days, let's put it that way. [00:04:23][13.8]

Alec Renehan: [00:04:23] Well, look, just to take the opposite side of the bet, I'll take it, but I would love to say it. Let's put a six pack on a show. [00:04:29][6.1]

Bryce Leske: [00:04:30] Sure. Nice. On Ren. So, yes, we are here to talk about CSL. As always. The structure of the episode will be a bit of a summary about the company. We'll touch on the industry and some of the major competitors for CSL have a look at the outlook and some of their future plans. Dig into the financials now. This is a company that some of the financials looking pretty good. Big profits, big profits. [00:04:51][21.0]

Alec Renehan: [00:04:53] There will be a valuation [00:04:53][0.8]

Bryce Leske: [00:04:56] because of that, we will be talking valuation. So Ren, without further ado, let's jump straight into it. CSL, one of the biggest companies on the stock market, is a global leader in developing and delivering high quality medicines that treat people with very rare and serious diseases. So at a time like covid, they're playing a pretty major part in what is going on at the moment. As you said at the start of the show, they called the Commonwealth Serum Laboratories. [00:05:21][25.6]

Alec Renehan: [00:05:22] If they were, they were. [00:05:24][1.6]

Bryce Leske: [00:05:24] Yeah. CSL founded in 1916. So it's been plugging away for a while now. It was an Australian government body that manufactured vaccines, but it was privatized, obviously, when it was Commonwealth and then listed on the ASX as CSL Ltd in 1994. And my goodness, if you were lucky enough to get up and hold it, it would have done incredibly well for you. [00:05:49][24.9]

Alec Renehan: [00:05:49] Forget Telstra. You would have wanted to own CSL. [00:05:52][2.9]

Bryce Leske: [00:05:52] This is a company that, if you do, zooms out and look at their overall stock price movements since it listed in 94. It's pretty phenomenal, a great compounder. So that is the briefest of introductions to what they do. But they are broken down into two really, I guess, main clear, distinct businesses Ren the first one being CSL bearing. Is that how you pronounce the direct bearing and then Aquarius or Securus? [00:06:16][23.5]

Alec Renehan: [00:06:17] I was just going to avoid saying that is nice, but you can't win. [00:06:20][3.1]

Bryce Leske: [00:06:21] So let's start with the CSL bearing, which is the first half of the business and probably the well, it is the major. Yeah, they manufacture plasma and recombinant based therapies, so we have to look at what that meant and that really means therapies that involve DNA technology. [00:06:38][17.1]

Alec Renehan: [00:06:38] Yeah, it's like blood plasma and stuff like that. [00:06:40][1.8]

Bryce Leske: [00:06:40] Yeah. So, so pretty technical and specialist medicines and therapies. And this part of the business accounts for more than 85 percent of their revenue to make it more simple what they are building medicines and treatments for people with issues with immunology and neurology, cardiovascular and metabolic issues, thrombosis, respiratory and transplant, therapeutic areas as well. [00:07:05][25.1]

Alec Renehan: [00:07:08] I just said to make it more simple and then you just throw a whole bunch of medical jargon. Did that make it more simple? [00:07:14][6.4]

Bryce Leske: [00:07:15] I don't think so. [00:07:15][0.6]

Alec Renehan: [00:07:17] Yeah. Look, they're on the cutting edge of creating treatments for a whole bunch of diseases and illnesses. The other half of their business, Securus, as you labeled it before, which I think is right, is the influenza business. It produces flu vaccines. It acquired that relatively recently five years ago from another biotech company, Novartis. Just to give some more context, this flu vaccine business is the second largest in the world. It also creates some antivenoms for snake bites. [00:07:46][28.5]

Bryce Leske: [00:07:46] Particularly important in Australia are given very we've got some of the world's most poisonous snakes and spiders. I think it's worth mentioning, though, that this is certainly one of those great Australian stories where it is now a global player. [00:08:00][13.9]

Alec Renehan: [00:08:01] Yeah, yeah. CSL is a company that Australians should be particularly proud of. Yeah. Not the Bryce doesn't have a BHP and Rio Tinto poster on his wall. And that not that he isn't proud of all the coal and iron ore that we're able to dig up and ship overseas. But CSL, it's a true Australian success story in the realm. But, you know, more impressive even than, you know, the players and the Rosemeadow and stuff of the world, these Australian health care technology companies that are really punching above their weight. It's an awesome company. Anyway, let's stop fumbling and get into it. So CSL operates in 35 countries around the world. It did a scratch, over nine billion dollars in revenue in us US dollars. But globally, in the last financial year. One thing that I quite like about CSL and I think is quite impressive is that they invest heavily in research and development. So every year they spend about 10 percent of their revenue on research and development and it just creates a product pipeline for them. The thing with biotech and pharmaceutical companies is there are quite heavy research and development requirements to begin with and then they go through the approvals process and then there's quite a long tail in which to commercialize these innovations and these treatments and these drugs and stuff like that. And so the fact that CSL is willing to invest so much of their revenue back into research and development, but more importantly, historically, have been quite good at using that R&D spend to produce products because there are companies that invest a lot in research and development but don't get much for it. But the fact that CSL is good in their research and development in coming up with a product pipeline of new innovations just means that it's a company that is setting itself up for future growth. So CSL has twenty seven thousand employees around the world and of that, under 2000 work in sort of R&D roles just to rattle off some numbers, over two hundred and seventy blood plasma collection centers across Europe and North America, they opened 40 in F1 20. They work with the Australian Red Cross to collect blood in Australia. They expect to add another 20 to 30 collection centers this financial year. They registered another twenty nine new products in NY Twenty, where the second largest ASX listed company will say if they're the largest. And as a nod to their culture, they've got good gender diversity. 57 percent of their employee base is female. [00:10:38][157.2]

Bryce Leske: [00:10:38] Yeah, I mean, maybe I'll review my bit because it was only seven days ago that they were the largest and they've come off four per cent. [00:10:44][5.6]

Alec Renehan: [00:10:44] Well, no, we made the bed and we put a six pack on it. [00:10:47][2.9]

Bryce Leske: [00:10:47] I'm still going. I'm still calling. Anyway, Ren you mentioned there, they have 270 plasma collection centers around Europe and North America. And this is obviously the way in which they collect all of the plasma and use it in their sort of product pipeline. And this is where covid really comes to play. CSL has underperformed in 2020 in comparison to previous years. [00:11:08][21.1]

Alec Renehan: [00:11:09] Important. [00:11:09][0.0]

Bryce Leske: [00:11:10] It is up 15 per cent year to date, which in itself is great given the sheer size of the company. However, if you look back over F1 17, 18 and 19, it's up 42 per cent, 33 per cent and 50 per cent respectively. So that's where you can say there is underperformance coming. Into play. And the reason for that is in the shorter term, I guess the market is a little concerned about the supply of blood plasma into dairying division, its main business, and what issue that lack of supply is going to have on future growth. And you might be asking, why is there a lack of supply? Whilst they do have a huge range of collection centers globally, which they do, I guess, rely on heavily for blood donations, covid has actually left people less interested in donating blood through fear of contracting. [00:11:57][47.4]

Alec Renehan: [00:11:59] less interested. Maybe a bit of a pejorative statement that, yeah, maybe it's just people are less abled. [00:12:04][4.9]

Bryce Leske: [00:12:05] Yeah, I was going to say you're actually not able to go out there and give blood if you're in lockdown. But it's an interesting side effect of covid that CSL is now experiencing reduced volumes in the amount of plasma and blood that they're able to collect. The impact of this is actually going to be unknown given the manufacturing cycle of covid. So they have a quite a long manufacturing cycle of CSL. [00:12:29][24.0]

Bryce Leske: [00:12:30] So the impact of this is a little unknown, which I guess is why the share market is now treating it as a bit more cautious. I guess the reliability of its pipeline is coming into question now. [00:12:40][9.9]

Alec Renehan: [00:12:41] So I guess if you're a CSL shareholder, go to the Red Cross and donate blood. Sure. At the same time, the other major impact of covid has been CSL have been working with the Oxford vaccine. So that's in partnership with AstraZeneca, the pharmaceutical company, and they've agreed to produce a number of doses, I think 30 million doses for Australia. They've also agreed to produce about 50 million doses of the University of Queensland vaccine for the Australian government. So CSL will have, I guess, some short term business in producing those vaccines. Fingers crossed for the world that producing covid vaccines doesn't turn into a long term business area for them because that will indicate that covers around long term. So they're involved in producing these vaccines in Australia. So that CSL. Let's talk about the broader industry, I guess. [00:13:31][50.8]

Bryce Leske: [00:13:32] Yes. So they're big player is there? The big industry space that they're playing in is the global plasma market, which is growing at roughly eight to 10 percent per annum. So pretty reasonable growth for a business to be involved in. They're experiencing huge growth for demand of their key products in IJI or otherwise known as immuno globals. Ren Knowing the experience in history, you have a studying medicine. Are you able to tell us what immune globe? [00:14:00][28.4]

Bryce Leske: [00:14:01] Yeah, sure. [00:14:02][0.7]

Alec Renehan: [00:14:02] So immunoglobulins are basically antibodies and they're produced by white blood cells and they're critical in, you know, fighting bacteria or viruses and stuff like that. And so that's what they are. [00:14:15][12.8]

Bryce Leske: [00:14:15] So then the question is, where is this growth come from for a company like CSL and particularly its products like IGY? Well, they're obviously benefiting from increased diagnosis of illnesses in immunoglobulins and also awareness of conditions that benefit from this sort of treatment. So there's the two areas in which they're growing. [00:14:35][19.6]

Alec Renehan: [00:14:35] So I think maybe before you go too deep down the immuno globin rabbit hole, just explain like I'm five cents. Basically, you know, a lot of these therapies can be used for people with immunodeficiency diseases. So, you know, if their bodies aren't producing enough white blood cells, aren't producing the proper white blood cells, you can use those treatments to support the body, to fight infections and viruses and stuff like that. That's one of the key business areas that CSL play in. And really a lot of what their research and development is about is how do we use this, I guess, method of fighting disease and fighting viruses on more and more viruses. [00:15:12][36.6]

Bryce Leske: [00:15:13] So they are part of, I guess, three major companies that play in this space, CSL, Giffels and Shia make up, I guess, the three top tier players. And between them, they have an estimated 80 percent market share in this space. So pretty large hold on the market. On the influenza side, as we mentioned, they do have a smaller part of the business. Securus holds 30 per cent market share. [00:15:36][23.4]

Alec Renehan: [00:15:37] So when you say influenza [00:15:38][1.0]

Bryce Leske: [00:15:41] Lewenza, Securus is the second largest player in the four and a half billion dollar a year industry in 2019. So they're both playing in pretty big markets. [00:15:51][10.5]

Bryce Leske: [00:15:52] Yeah. [00:15:52][0.0]

Alec Renehan: [00:15:52] So the good thing with being a big player in this space is that it actually creates a barrier to entry in and of itself. And we often talk about Moat's on the podcast and a lot of the expert investors we speak to want to find a company with a moat which basically protects them from their competition. In Sarcelles case, one of their biggest moat is, in fact their size, because a lot of what they do is quite expensive. The fact that they're able to operate at such scale, they have a cost advantage over some of their competitors and that's actually reflected in their margins. So the. The three big players in this blood plasma business have considerably better margins than a lot of the smaller players, on average about 20 percentage points higher. So it just means that they have pricing power. They can reinvest that excess profit in more research and development, stuff like that, or they can invest it in continuing to grow, which in theory should make them even bigger. That's really one of their Kimoto. I guess the other out is that R&D that we talked about earlier, the fact that they're willing to reinvest so much of their revenue back into research and development creates a product pipeline that is difficult for competitors to get ahead of. And so, as with all pharmaceutical and health care companies, you've got to stay ahead of what the best in class treatments are. And as an investor in CSL, what you would hope to see is that CSL are able to stay ahead of the game, stay ahead of their competitors and build out that product pipeline and that cost advantage and really protect their business in that way. [00:17:23][90.6]

Bryce Leske: [00:17:24] Nice Ren. So we've spoken about a bit of the company summary, some of the industry context and competitors, and it's moed. And before we jump into the outlook for CSL, let's hear from our sponsors. OK, so CSL, what's coming in the future? Unfortunately, we don't have contact to chat to their CEO, that would be our ambitions for 2020. Yeah, so we're relying on ourselves here, Ren. But I mean, what is to come for CSL in 2021 and beyond? [00:17:53][29.4]

Alec Renehan: [00:17:54] Yeah, so I think the first thing that we keep touching on is that product pipeline, what that research and development is going to lead to. What they've said to the market is that they're focused on therapeutic areas where they have strong assets and established expertize, and they really want to continue to come up with new treatments and new products and new therapies in those areas. You know, they're looking at things like cell based vaccines rather than egg based vaccines and stuff like that. But I don't think we want to go too far down the medical rabbit hole because neither you nor I have really any expertize to speak to that. But that's really the first thing. The second thing that they've spoken about in terms of their outlook, which I find quite funny, that every company is finding a way to do that, is talking about data analytics and machine learning. And CSL are talking about, you know, enhancing shareholder value and better serving their patients through the adoption of, you know, big data and new tech to improve their operations and increase their understanding of patient experience. They're talking about using data science and I and machine learning throughout the business to facilitate a digital transformation. They're talking about integrating it more into their research and development. And, of course, that's all going to happen. It's buzzword buzzwords. Yeah, fair enough. I guess like that. I'm sure they are doing it. You know, they're talking about things like using virtual reality to train employees at facilities and stuff like that. [00:19:15][80.9]

Bryce Leske: [00:19:15] And yeah, I mean, Equity Mates are also going to be integrating data science, artificial intelligence and machine learning throughout the business to facilitate digital transformation. [00:19:23][8.4]

Alec Renehan: [00:19:26] Although claim that, [00:19:27][0.8]

Bryce Leske: [00:19:29] yeah, you're right around a lot of buzzwords and it's not surprising to see as many, many more businesses these days turn to digital transformation. We've spoken about, you know, the likes of Salesforce and the cloud. And, you know, we've really touched on this a lot in 2020. There's no surprises there. What that actually really means and translate to in terms of revenue growth and bottom line, that's probably more of unknown at this stage because a lot of it is just we've got to do this because everyone else is doing it. I am interested in this CSL one one two Ren, CSL one one two is CSL is the largest ever clinical trial currently in phase three trials. And this is what I like about it is designed to remove plaque from arteries. [00:20:08][39.7]

Alec Renehan: [00:20:09] You like it because you know, that's a big risk factor for you future. [00:20:12][2.4]

Bryce Leske: [00:20:12] lies, lies. [00:20:13][1.7]

Alec Renehan: [00:20:14] All that deep fried you are eating. [00:20:16][1.6]

Bryce Leske: [00:20:17] Cardiovascular disease is the leading cause of death globally. And if CSL can pull this off, then this is really going to be a game changer and a driver of growth for CSL going forward. I think, you know, if they can provide a product that really plays in this space, then well done to them. I guess the R&D is not going well, but interesting to see if this comes off and how it can drive growth for CSL. [00:20:41][23.3]

Alec Renehan: [00:20:41] Yeah, one of the cool things I like about this, other than the fact that it will save your life from cardiovascular disease, is the trial uses waste products from donated blood. So like parts of the blood that currently aren't being used and are just wasted, which, you know, I'm all about sustainability and it's a good recycling story. [00:21:01][19.6]

Bryce Leske: [00:21:03] And in the big trend, they've starting to play in as well. Ren is the gene therapy. Now, this is, I guess, controversial in some instances you can see that it's going to be playing a big part in years to come as technology improves and they start to cure rather than treat gene based illnesses and diseases going forward. So they are playing in this space as well. [00:21:25][22.3]

Alec Renehan: [00:21:26] For people unfamiliar with gene therapy, CRISPR, which I can't remember what it stands for, but I don't think I would even attempt to say if I did. Where you basically can edit genes is really coming in quickly. And a big part of that is that our understanding of like the human genome is just so vastly improved. The cost to map the first human genome ever was two a bit over two and a half billion dollars. And now they can map the human genome for apparently it's like a few thousand dollars, like the cost of that is just coming down massively. And our understanding of genes and what that means for gene therapy and gene editing is just pretty crazy. And like, you can go down a pretty big rabbit hole with some of these things. You know, this is where the whole conversation around, like designer babies and stuff comes in. And it's like, well, if you can edit someone's genes, can parents choose what color eyes that kids have or like what gender their kid is and stuff like that. And that's a pretty dystopian rabbit hole to go down. And it's some big ethical questions that the world is going to have to deal with. But the other side of gene therapy is there is a whole bunch of diseases that are currently. Untradeable that will be able to be traded. [00:22:38][72.3]

Bryce Leske: [00:22:38] Yeah, so Ren let's move on to the financials and have a crack at the valuation. Big, big top line revenue coming in from CSL over the last few years currently think 2020. They did nine billion in revenue. If you look at how they've performed over the last sort of four years, they've been growing year on year between sort of seven to 12 per cent, which is roughly in line with the growth rate of the industry, to be honest. So you would kind of expect that the good news, though, Ren, is that their profit is pretty substantial as well. So despite all the R&D, despite all of everything that I guess is going on, they turned over a profit of two point one dollars billion. [00:23:18][39.6]

Alec Renehan: [00:23:19] Yeah, and what you'll find is a lot of analysts, when they talk about CSL, give talk about two numbers for CSL. They talk about CSL like statutory profit, and then they talk about CSL profit, excluding their R&D, because, you know, the company is making a choice to reinvest that money in R&D, which is a good choice. But if they weren't investing so much money in R&D, their profit numbers would be even more impressive. [00:23:42][23.8]

Bryce Leske: [00:23:43] Yeah, their return on invested capital has been consistently above 20 per cent Ren. So pretty good returns there. So the management obviously know what they're doing in terms of allocation of capital. As you said, R&D, roughly 10 to 12 per cent of revenue, and that's that's paying dividends. So it's a profitable company earning good money in an industry that's growing reasonably well, eight to 10 per cent a year not complying with that. So in terms of valuation Ren [00:24:08][25.2]

Alec Renehan: [00:24:09] before we get to valuation, I think talking about CSL, because we've been incredibly glowing about CSL and rightfully so, but it might just be worth taking two minutes to talk about risks because CSL aren't the only biotech company that invest heavily in R&D. And I think the important thing when you're investing in a company like this is just to understand that there are always risks to existing treatments from new and novel treatments coming out of pharmaceutical companies, coming out of universities, coming out of a number of different research facilities. And so some say it sounds like businesses may be doing incredibly well at the moment, but they've always got to stay ahead of the curve. And new and novel treatments can come in that are cheaper or more effective or easier to distribute or less invasive for patients and stuff like that. And so that's the really difficult thing about investing in biotech. And, you know, we always talk about circle of competence, but this is where it really comes into play. And there's so much money being invested in this sector in fighting different diseases and stuff like that. And to take you a cardiovascular trial as an example, like potentially CSL are the best and the clinical trial works. And there's a whole new business unit that's created there and a whole bunch more revenue and profit that's created out of it. Or potentially someone comes up with a better, better solution for cardiovascular disease. And that investment is worth Nort. And, you know, that opportunity goes away or that, you know, behind the eight ball in terms of where that technology is. So I think whilst CSL have had incredible growth and whilst there are no indications that any of that is going to slow, and really the only question that a lot of people have about CSL is the price you have to pay for it, which we'll get to. That is just a risk that's always worth keeping in mind when you're talking about biotech. [00:25:55][106.9]

Bryce Leske: [00:25:56] Yeah, absolutely. All right, Ren. Let's look at the valuation so we can start with relative valuation and then we can have a look at the DCF. So if we're talking relative, we can look at the price to earnings. They are making money. So we are able to look at price to earnings. CSL currently trading at a 47 price to earnings. Now, you did mention the exclusion of R&D. If you were to exclude the R&D, then they're trading a little bit cheaper at 35 in terms of their major competitors. Giffels is one of the big ones. It's trading at 31, so a little bit cheaper than CSL Toccata Pharmaceuticals. Another a big player in this space is almost twice as expensive as CSL at one or two. But the industry average is 50 Payet. So pretty in line with what CSL? [00:26:44][47.4]

Alec Renehan: [00:26:45] Yeah, if we get to the discounted cash flow now again we say this whenever we do one of these. This is really just a sense check in some ways because the assumptions that you put in can just greatly differ. The outcome CSL is expensive is the long and the short of it. But the important caveat is that CSL has always been expensive and people often talk about Amazon, how it always traded at a pay of sixty. And a lot of people would never buy it because I like Amazon's too expensive at a price to earnings ratio of 60 [00:27:15][29.9]

Bryce Leske: [00:27:15] years having the last. [00:27:16][0.6]

Alec Renehan: [00:27:16] Yeah, yeah, yeah. But it just continued and a phenomenal growth rate and just compounded and compounded and compounded. And for many people, that's the story of CSL. You'll never be able to buy it at a price to earnings ratio of 20. You'll never be able to buy it at fair value that a discounted cash flow comes in, that you just really have to ask around like. What's the long-term outlook for a company like this, but in saying that if we were to plug some numbers in and if we took the earnings per share, we used a discount rate of 10 percent. And we used over the last 10 years, the earnings per share at an average annual rate has grown at fifteen point one percent. So if you plug those in and then you use a four percent terminal growth right after the 10 years, you're getting about one hundred and sixty five bucks a share. So it currently trades at three hundred and three. So it's expensive. I mean, if you flip it around and you do a reverse discount cash flow where you say, OK, the share price is three hundred and three, what is the growth rate built into the company using those same assumptions, using the 10 percent discount rate, using the terminal growth rate, that is telling you that the market is expecting it to grow its profit at 24 percent a year over the next 10 years. OK, which is higher than average in terms of sales past performance, and it's higher than the industry growth rate. But the thing is, if this cardiovascular disease trial comes off or, you know, if they make a breakthrough in gene editing, technology, and gene therapies, then maybe that's conservative. So, yeah, it's expensive. It's always going to be expensive, but it doesn't change the fact that I think it's a great company. [00:28:53][96.9]

Bryce Leske: [00:28:53] Yeah, great. Well, massive. Thank you to Jesse, who helped us with the research on this one. He's an Equity Mates community member. Hats off. We've done an amazing job. Also a big thank you to the sponsors for the Equity Mates summer series of 2020. And that is superhero, Australia's cheapest broker. They're offering five dollar brokerage flat fee as well as zero dollar brokerage on ETFs. Unheard of here in Australia. A great deal superhero. [00:29:17][24.0]

Alec Renehan: [00:29:18] Yeah, so and if you want to own CSL, you could buy an ASX 200 ATFP with no cost through superhero. Yes. And so I would either be the largest or the second largest holding, depending on how CSL finishes the concept. [00:29:32][13.8]

Bryce Leske: [00:29:32] So anyway, Ren always good to chat stocks and looking forward to the next episode. [00:29:32][0.0]

[1628.8]

More About

Meet your hosts

  • Alec Renehan

    Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

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