5 ASX Defensive Stocks to look at - CSL, SHL, WOW, COL, CCL

  • Jun 29, 2020 AEST
  • Team Kalkine
5 ASX Defensive Stocks to look at - CSL, SHL, WOW, COL, CCL

Summary

  • Defensive stocks are popular with market participants as they provide steady earnings and offer dividend payments. Volatile markets make these stocks more attractive as they deliver certain payments in times of uncertainty.
  • The dividend offered during crisis acts as a cushion when the stock price falls.
  • CSL set to acquire uniQure’s gene therapy candidate for Haemophilia B; announced the acquisition of Vitaeris Inc.
  • CSL also signed a deal with CEPI and University of Queensland to progress the development of COVID-19 vaccine candidate.
  • Woolworths took a significant step towards NSW supply chain transformation.

Defensive stocks are very popular amongst the investor as they provide dividend payments and generate steady income irrespective of the prevailing market conditions. The offerings provided by these companies are in demand which makes them more stable during any uncertainty in the market.

The greatest advantage of having defensive stocks is that they are not as risky as other regular stocks, and they offer increased dividend yield that can be made in a low-interest-rate environment.

In this backdrop, let us quickly look at five stocks from the healthcare and consumer staples sectors and see their recent development.

CSL Limited (ASX:CSL)

CSL Limited, the developer, manufacturer and marketing of pharma and diagnostic products, cell culture media and human plasma fractions has consistently provided dividends since the last five years. In June 2020, the company announced certain important announcements covered below.

Agreement to Acquire Late-Stage Gene Therapy Candidate for Haemophilia B from uniQure:

On 25 June 2020, CSL Limited revealed that it has decided to acquire from uniQure sole global license rights to commercialise an adeno-associated virus (AAV) gene therapy plan, AMT-061 (etranacogene dezaparvovec), for the therapy of haemophilia B.

At present, AMT-061 program is in phase 3 of the clinical trial. It could be amongst the first gene therapies to offer potentially long-term benefits to patients suffering from haemophilia B.

One dose of AMT-061 was able to increase Factor IX (FIX) plasma levels to a level that lessens or removes the tendency for bleeding for many years. For Information, Factor IX (FIX) plasma is the blood clotting protein which is not present in people suffering from haemophilia B.

In case AMT-061 becomes successful, suitable candidate haemophilia B patients can have a one-time therapy to restore FIX activity to functional levels capable of reducing the need for frequent & continuing replacement therapies.

As per the agreement with uniQure, once the transaction between both the companies closes, CSL would have the global rights to commercialise AMT-061.

Other Recent Announcements:

  • On 9 June 2020, CSL Limited announced that it has agreed to exercise its right to acquire Vitaeris Inc, which is a clinical-stage biotechnology company that focuses on the phase III development of a treatment for rejection in solid organ kidney transplant patients. The companies have signed the deal to speed up the development of this program with the option for CSL to acquire Vitaeris in full.
  • CSL, on 5 June 2020 entered into a partnership with the University of Queensland and CEPI (the Coalition for Epidemic Preparedness Innovations) to advance development and manufacture of the COVID-19 vaccine candidate.

Do Read: How CSL is combating with the COVID-19 Pandemic?

Sonic Healthcare Limited (ASX:SHL)

Sonic Healthcare Limited is amongst the largest medical diagnostics companies in the world. This company has also provided its shareholders with a dividend consistently for five years.

Trading Update:

On 24 June 2020, SHL provided a trading update where it highlighted that for 8.5 months to mid-March 2020, SHL’s results were in line with the earnings guidance previously provided. However, in the second half of March, the lockdown and the pandemic resulted in a drastic fall in the base patient volumes and revenues, almost across its global businesses.

With the uncertainty surrounding the extent and duration of the falls and the timing to recovery, SHL’s global divisions responded quickly to the safety of staff. The Company reduced the cost significantly to mitigate against the revenue gaps.

The declines in base business revenues varied considerably by the market. However, early stabilisation levels were evident from late April 2020. In recent weeks, the company noticed that majority of its divisions have returned to pre-COVID-19 base volumes and revenues. In the US, the UK, Ireland and Belgium, the base revenues are still below the pre-COVID-19 levels, but there is a positive trend in these countries. Other than the recovery of base volumes/revenues, most of Sonic’s businesses are integrally engaged in extensive COVID-19 testing.

In the present scenario, SHL expects its EBITDA to be at the same level as that of 2019, which was A$1.075 billion.

Woolworths Group Limited (ASX:WOW)

Woolworths Group Limited provides food, general merchandise and speciality retailing through chain store operations. It has also been consistent in offering dividend to its shareholders for the past five years.

NSW Supply Chain Transformation, FY2020 Significant Items and Trading Update:

On 23 June 2020, WOW  updated its plan to develop two new automated distribution centres at Moorebank in NSW, whose construction is expected to finish by CY2023, and the initial benefits could be realised in 2025.

These planned sites are subjected to government approval. They are expected to improve the capacity for growth, improve efficiency, advance localised ranging efforts, and provide better and securer experiences for Woolworths stores, team, and customers. These facilities would be built on the automated technology installed at the Group’s Melbourne South Regional Distribution Centre (MSRDC)

FY2020 significant items:

Image Source: WOW's report

In FY20, the expected pre-tax significant items would be $591 million. In Q4FY2020, WOW delivered strong growth in sales. FY2020 EBIT is expected to range from A$3,200 million to A$3,250 million.

Coles Group Limited (ASX:COL)

Coles Group Limited is an Australian retailer of products like fresh food items, groceries, household goods, liquor, fuel, and financial services via stores and online. Coles got listed on ASX on 2018 and has been consistent in paying a dividend to its shareholders.

Recent Updates:

  • On 25 June 2020, Coles in its media release, reported the second case of coronavirus at Coles Laverton Distribution Centre. Presently, it is working with the Victorian Department of Health and Human Services after the second case was reported at its distribution centre to expedite COVID-19 testing of team members working at the site as fast as possible.
  • In the media release on 24 June 2020, Coles announced the implementation of various provisional methods to enhance the availability of essential food & grocery items in its Victorian supermarkets and assist customers in shopping safely.

Following the dialogue with the Federal & Victorian governments along with other retailers, Coles also talk about the implementation of the purchase limit for Victorian Supermarket to handle demand for staple substances.

  • Another media release on the same day pointed out that Coles’ Laverton distribution centre in Victoria is clear to resume operations after a single team member tested COVID-19 positive.

Coca-Cola Amatil Limited (ASX:CCL)

Coca-Cola Amatil Limited is engaged in the manufacture, distribution, and marketing of beverages. CCL has also provided its shareholders with dividend in the last five years.

Trading Update in April 2020 and first three weeks of May 2020:

  • Stringent COVID-19 lockdown measures were in place during April 2020, which had an adverse impact during the peak Easter, ANZAC Day, and Ramadan trading period.
  • Beverages sector overall adversely impacted across all of Amatil’s markets.
  • Amatil outperformed the sector with respect to achieving share growth in its major markets. However, a significant drop was seen in the volume of beverages sold, dropped 33%.
  • CCL also noted an adverse impact on the EBIT and cashflow, partly lessened by strict cost management & slashed capital expenses.
  • By mid of May 2020, there was moderate improvement in the in trade in the first three weeks of May 2020.

In New Zealand, during level 4 lockdown, ~75% of CCL’s OTG customers were closed for business, which resulted in a decline in volume and revenue. In Fiji, NARTD Volume & revenue slipped around 45% in April 2020 as compared to the previous corresponding period.

In Indonesia, the business was the hardest hit in the first two weeks of April, and volume declined 50% due to social distancing measures.

Papua New Guinea reported ~ drop of 26% in volume and 25% in revenue in April 2020 because of Government’s State of Emergency declaration.

Stock Information:

Source: ASX

Source: ASX

 


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