Two Stocks trading at Multi-year high: CBA and CSL

  • Jan 28, 2020 AEDT
  • Team Kalkine
Two Stocks trading at Multi-year high: CBA and CSL

The stock price is directly co-related with the performance of the business. The key driver of the stock price is the growth in the bottom-line of the business. A growth in the earnings per share (EPS) results in the movement of the stock price, while keeping the price to earnings ratio at a constant basis. While a degrowth in the bottom-line results in the proportional decline in the stock price.

Also, price to earnings (PE) ratio plays an important role in deciding the current stock price. If the market believes that the business has the potential to deliver improved margin with growth in the profitability, then the stock price would discount the expected earnings within the current stock price. Thus, we will be going through two stocks which has a decent business prospects and are trading at multi-year high.

Commonwealth Bank of Australia (ASX: CBA)

Commonwealth Bank of Australia provides services like banking, financial and the related services. On 24 January 2020, the company informed that it has ceased to be a substantial holder in Monadelphous Group Limited from 23 January 2020.

On 28 January 2020, the stock of CBA is quoting at $83.835, down by 1.301 percent (at AEDT 1:09 PM) and trading at multi-year high since May 2015.

Q1FY20 Financial Highlights for the Period ended 30 September 2019: CBA declared its first-quarter results for FY20, on 12 November 2019, wherein the bank reported a statutory net profit of approximately $3.8 billion, including a $1.5 billion gain on sale of CFSGAM (Colonial First State Global Asset Management). Net profit from continuing operations came in at $2.3 billion.

Further, the quarter witnessed 2% y-o-y increase in operating due to higher staff costs and IT amortisation. Loan Impairment expense stood at $299 million during the quarter, reflecting 16 bps of average Gross Loans and Acceptances (GLAA). CET1 ratio, during the quarter stood decent at 10.6% after 2019 final dividend payments. The business reported a decent funding position with deposit funding at 69% and the Net Stable Funding Ratio at 112%.

The company reported increase in consumer arrears driven by the seasonality and the gain of higher tax refunds. Personal Loan, on the other hand continued to be raised on account of lower portfolio increase and while continued pockets of stress was foreseen in Western Sydney and Melbourne.

Q1FY20 Credit Quality Report (Source: Company’s Report)

Other Operating Highlights: The quarter was marked with strong funding and liquidity positions representing the customer deposit funding at 69% while the average tenor of the long-term wholesale funding portfolio stood at 5.4 years. During the quarter, the Group reported an issuance of $5.8 billion of long-term funding including two long-dated Tier 2 transactions.

Other key metrics were retained at robust levels over the quarter, reporting 112% of Net Stable Funding Ratio while Liquidity Coverage Ratio (LCR) stood at 130%. The company reported Liquidity Coverage Ratio (LCR) at 130% and Leverage Ratio at 5.5% on an APRA basis.

Stock Update: The stock of CBA is quoting at $83.870, moving down by 1.26 percent (at AEDT 1:51 PM), with a market capitalisation of $150.36 billion. The stock is quoting at the upper band of its 52-week trading range of $69.150 to $85.40. CBA has generated a dividend yield of 5.07% on an annualised basis. The stock is trading at a price to earnings multiple of 17.490x. The stock has delivered returns of 17.14% in the last one year.

CSL Limited (ASX: CSL)

CSL Limited leads the biotechnological space, internationally. The company is into the development and delivery of innovative medicines with the purpose of saving lives, providing protection to public health and aid individuals with life-threatening medical conditions live full lives.

Recently, the company reported the issuance of 10,930 fully paid ordinary shares under Performance Rights Plan (PRP) at nil price, upon exercise of Rights and Options granted.

FY19 Financial Highlights for the Period ended 30 June 2019: CSL declared its full year results, wherein the company reported total revenue at US$8,539 million as compared to US$7,915 million. The total operating revenue came in at US$8,538.6 million as compared to US$7,915.3 million in FY18. The company reported its research and development expenses at US$831.8 million as compared to US$702.4 million in FY18. The company reported gross profit at $4,777.4 million as compare to $4,383.7 million in FY18. Operating profit during the quarter stood higher at $2,504 million as compared to $2,380.3 million in FY18. The company’s net profit came in at US$1,918.7 million as compared to US$1,728.9 million in the previous financial year.

During the year the business launched HAEGARDA® and witnessed strong growth in KCENTRA® across the US. The company opened 30 new centres across the US. The company reported total centres at 221 in the US, 8 centres in Germany, 3 in Hungary followed by 5 in China. During the year, the company acquired a Liquid saline & sodium citrate facility in order to support plasma collection in the South Carolina US.

FY19 Financial Highlights (Source: Company’s Report)

Segment Highlights: From the CSL Behring segment, the business has reported sales of US$7,187 million, depicting a growth of 11% on y-o-y basis. Gross Profit from Behring stood at US$4,195 million, grew 11% from FY18 period. The segment reported a GP margin of 57.1% as compared to 57.0% in previous financial year. EBIT from the segment stood at US$2,351 million as compared to US$2,328 million in FY18, depicting a growth of 5% on y-o-y basis. EBIT margin, during the year stood at 34.1% as compared to 32.0% in FY18.

From the Seqirus segment, the business reported a Sales of US$1,018 million, increased 14% from US$910 in FY18. Total revenue, during the period stood at US$1,196 million, grew 12% from FY18. Gross Profit was reported at US$582 million, up 20% from FY18. GP margin came in at 48.7% as compared to 45.1% in previous financial year. EBIT stood at US$154 million, grew 180% on y-o-y basis.

Guidance: The management is planning to open ~40 collection centres in FY20, while the company is looking for capacity expansion across the manufacturing facilities. CSL has reported strong demand from the plasma protein segment and aims for the commercialisation of five global product launches. In addition, it has a R&D pipeline for Cardiovascular disease, transplant and gene therapy. The company is expecting its net profit after tax within the range of $2,050 million to $2,110 million at constant currency terms for FY20.

Stock Update: The stock of CSL is quoting at $313.230, up by 0.814 percent (at AEDT 3:37 PM) with a market capitalisation of ~$141.02 billion. The stock is trading at the lower band of its 52-week trading range of $184.00 to $319.000. The stock has delivered stellar return of 39.12% and 56.24% in the last six months and one year. The stock is quoting at the price to earnings multiple of 51.440x on its trailing twelve months (TTM) basis. At current market price, the stock has delivered annualised dividend yield of 0.86%.


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