CSL Limited

CSL Details

 Significant Growth Across regions and segments: CSL Limited (ASX: CSL) is an Australia-based biotechnology company engaged in the developing and delivering medicines that treat people with rare diseases. It offers treatments for people who are living with conditions in the immunology and neurology; haematology and thrombosis; cardiovascular and metabolic; respiratory, and transplant therapeutic areas. Its segment includes CSL Behring and Seqirus. CSL has registered a revenue growth across all the regions it operates in during 1HFY21. The major growth of 79% YoY came from Asia Pacific region followed by the US, which witnessed an increase of11% YoY. Whereas, EU, North America and ROW has registered a single digit growth over the prior corresponding period. Across CSL Behring segments, Albumin has posted a significant sales growth of 93% YoY to $546mn in 1HFY21, followed by a 7% YoY growth in immunoglobulins, 3% YoY growth in Specialty and 1% YoY growth in Haemophilia. Across Seqirus segment, the overall revenue grew by 38% to $1,425mn with a major growth of 64% YoY from EU region, followed by 38% YoY growth in North America and 17% YoY growth in ROW. Notably, Asia Pacific has seen a de-growth of 9% YoY in the Seqirus segment. EBIT has risen by 24% and 112% for CSL Behring and Seqirus, respectively, in 1HFY21.

CSL Behring and Seqirus Performance (Source: Company Reports)

Dividend Declaration: CSL on 18 February 2021 has announced a dividend distribution of USD1.0400 to its shareholders for which the Ex-date will be 4 March 2021 and Payment date will be 1 April 2021. 

Outlook: As per company reports, CSL is expecting a strong demand for underlying Immunoglobulin (IG). Sales for IG and Albumin for FY22 will be dependent on plasma collections and cycle times. R&D programs may provide new growth opportunities for CSL in the future.

Valuation Methodology: EV/Sales Multiple based Relative Valuation (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

^ 1USD = ~1.29 AUD

Stock Recommendation: In the last one month, CSL has corrected by ~0.53% and by ~9.11% in the last three months. The stock is currently trading below the average 52-weeks’ price range of $242.67-$332.68. On the technical analysis front, the stock has a support level of ~$263.9 and resistance of ~$274.88. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer average, considering mixed sales performance across Seqirus segment and an increase in operating expenses during 1HFY21. For the purpose we have taken peers, Medical Developments International Ltd (ASX: MVP), Mesoblast Ltd (ASX: MSB), and Adalta Ltd (ASX: 1AD). Considering a significant sales growth in various regions and varied segments, positive outlook, dividend distribution, valuation, and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $270.28, up by ~2.93% as on 1 March 2021.

CSL Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Bank of Queensland Limited

BOQ Details

ME Bank Acquisition Would be Earnings Accretive for BOQ: Bank of Queensland Limited (BOQ) is an Australia-based regional bank. The company’s operating segments include retail banking, BOQ business and other. The retail banking solutions to customers are managed through its Owner Managed and Corporate branch network, third party intermediaries’ and Virgin Money distribution channels. BOQ Business includes the BOQ branded commercial lending activity, BOQ Finance and BOQ Specialist businesses. Recently, the company stated that it will acquire 100% of ME Bank for a cash consideration of ~$1.325 billion. Post-acquisition of ME bank, BOQ is expecting a strong balance sheet with a robust capital position along with an increase in total assets and deposits. The company is expecting a pre-tax cost benefit in the range of approximately 70-80mn p.a. Moreover, BOQ is expecting 100bps of improvement on its cash ROE and low-double digit to mid-teens growth in its cash EPS in FY22.

Post-Acquisition Synergies (Source: Company Reports)

Turnaround in Retail Banking: BOQ has registered a turnaround in retail banking performance since FY19. BOQ has recorded an increase in Application Volumes in FY20 and consumer NPS ranking has been improved to 4^th as compared with 5^th in FY19.  

Outlook: As per the company report on 22 February 2021, BOQ expects a low double digit to mid-teens cash EPS accretive in the first year (FY22). Further, it expects cash ROE to be accretive, which includes full run rate synergies in the first year. BOQ is expecting to complete the divestment of St. Andrew’s in 2H21. 

Valuation Methodology: P/B Multiple based Relative Valuation (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: In the last one month, BOQ has increased by 15.13% and by 18.86% during the last three months. The stock is currently trading above the average of its 52-weeks’ price level range of $4.379-$9.440. On the technical analysis front, the stock has a support level of ~$8.53 and a resistance of ~$9.30. We have valued the stock using a P/BV multiple based illustrative relative valuation method and arrived at a target price of low-double digit upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer average, considering decline in interest margins and low deposit growth. For the purpose we have taken peers such as, Westpac Banking Corp. (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Bendigo and Adelaide Bank Ltd (ASX: BEN). Considering the acquisition synergies from ME bank, growth in deposits and total assets, positive outlook, valuation, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $8.91, down 1.365% as on 1 March 2021.

BOQ Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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