Blackmores Limited

Decent Performance in 1HFY19: Blackmores Limited (ASX: BKL) recently announced half-yearly results where it reported an increase in its revenue by 11% PCP to $319 Mn. This was due to record sales driven by the company’s investments in advertising and promotions in the past few months. Domestic sales accounted for 6% revenue growth with a 16.7% market share.

Its net profit after tax was reported at $34 Mn in line with the previous corresponding period because of softening in growth in China and investments for acquisitions of Impromy which an evidence-based weight management program in collaboration with the CSIRO. Following this, net debt was reported to increase to $71 Mn with a gearing ratio of 25%.

It reported a 22% increase in its operating cash-inflow as compared to the previous period. The cash conversion ratio improved to 60% from 52% in the previous period. Owing to strong financial result, the Board of the company declared an interim dividend (fully franked) of 150 cps with the payment date of March 20, 2019 and record date of March 5, 2019. Further, the Dividend Reinvestment Plan (DRP) remains available to shareholders for the interim dividend to reinvest distributions in the Company’s securities and to support the funding of growth initiatives. Shareholders who opt to participate in the DRP will benefit from a 2.5% discount.


Financial Metrics (Source: Company Reports)

In another update, the company announced the resignation of its CEO & MD, Mr. Richard Henfrey.

The company expects its second-half performance to be moderate in comparison to the first half as its sales in China were impacted due to change in consumer sentiments and purchase style along with higher inventory in the trade. Apart from China, other markets are expected to perform well in the fourth quarter. For sustainable future growth, it is working on Business improvement program across all the organization to target $60 Mn of savings over the next 3 years which will be used for strategic initiatives, investments in people and capacity, and delivery of overall margin improvements.

Stock Recommendation: BKL’s share price generated negative YTD return of 26.94%, however, its 5 yrs. absolute return stood at 263.13% as reported on March 08, 2019. Its top-line and bottom-line has shown improvement from previous years. As growth in Chinese market softens, it would be imperative to look at its quarterly performance before any investment decision.

As per the technical analysis, Relative Strength Index (RSI 14 days) shows that the stock is currently trading in the oversold region which indicates buying opportunity may pop up sooner or later. Hence, we suggest to investors that they should keep a close “Watch” on the stock at the current market price of $91.05 (down 0.503% on March 11, 2019).
 

CSL Limited

An update on CSL’ H1FY19 performance: CSL Limited (ASX: CSL) has recently announced its H1FY19 result report where it reported an increase in its sales revenue by 11% PCP (CC) to $4,505 Mn. It was driven by increased usage of immunoglobulin products for chronic therapies, tripling of sales of transformational Hereditary Angioedema products (HAEGARDA), and increased sales of adjuvanted influenza vaccine along with Seqirus’ portfolio of influenza vaccines transitioning towards higher valued Quadrivalent vaccines. Its EBIT increased by 6% (CC) to $1,553 Mn, and its reported net profit after tax increased by 10% (CC) to $1,161 Mn. Its EPS increased by 10% (CC) to $2.56. Owing to good performance, the company’s Board declared an interim dividend of US$0.85 per share which in Australian currency reported at $1.2 per share with an increase of 20%. The dividend payment date is on April 12, 2019 and record date on March 14, 2019.


P&L Statement (Source: Company Reports)

The company expects the demand for CSL’s plasma and recombinant products to grow strong. It aims to again outpace the market in growing plasma collections and thus it plans to open between 30 and 35 new collection centres this financial year which is on track. It expects its net profit after tax for FY2019 to be in the upper end of the range between ~$1,880 Mn to ~$1,950 Mn at constant currency.

Stock Recommendation: CSL’s share price generated positive YTD return of 7.57%, and its one-year return stood at 21.98% as reported on March 08, 2019. Its top-line and bottom-line has shown a good result as compared to the previous year. The company’s guidance of improved net earnings performance shows management confidence over its business. Although the company has been a consistent performer and value generator for the investors, the current price might have discounted all the recent positive developments. Therefore, investors are recommended to wait for any correction to buy on dips; hence we place our watch stance on the stock at the current market price of $198.88 (down 0.266% on March 11, 2019).
 

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