How Good Are These 3C’s When it Comes to Quality Stocks - CSL, COH, CKF

Summary

• Quality stocks comprise of companies with substantial growth potential, consistent earnings, limited debt, and ability to withstand turbulent times.
• CSL Limited announced the acquisition Vitaeris to develop a treatment for CABMR in kidney transplant patients.
• CSL also collaborated with CEPI and the University of Queensland to develop a vaccine against COVID-19.
• Cochlear has started picking up with resumption in implant surgeries and had strengthened its balance sheet via AUD 1.1 billion capital raising.
• Collins Foods has been resilient and showed sales improvement in April 2020.

Several businesses are confronting critical times amidst the COVID-19 pandemic. However, some companies have experienced negligible effect because of their operations, which were either considered essential or were catering to the opportunities that arose due to the pandemic.

In the past few months, share markets across the world have been fluctuating on both sides. There are various aspects comprising market sentiments – from the uncertain environment arising from the great virus crisis (GVC) to the mounting tensions between the most prominent economies of the globe, the United States and China.

A portfolio of quality stocks would include companies that are well-known, have consistently generated profits, and have shown resilience in times of uncertainty. In the present scenario, such stocks would gain prominence as the crisis has indicated that even the strongest of companies can fall when an event of such magnitude hits the globe.

In this article, we will discuss three ASX-listed quality stocks - CSL, COH, CKF

CSL Limited (ASX:CSL)

ASX-listed global biotech leader CSL Limited is engaged in the development and delivery of treatments for rare and serious disorders and influenza vaccines. With eight manufacturing sites, the Company is one of the rapidly-expanding and largest protein-based biotechnology companies and a prominent supplier of in-licensed vaccines. With more than 26,000 employees, CSL serves in more than 60 nations across the globe.

CSL to acquire Biotech Player Vitaeris

On 9 June 2020, CSL Limited consented to exercise its right for the acquisition of a clinical-stage biotechnology company Vitaeris Inc that is focused on the Phase 3 development of a treatment of CABMR* in kidney transplant patients.

With this acquisition, Vitaeris research assets join CSL964 and CSL842 as part of CSL’s product portfolio in late-stage development for the treatment of significant unmet medical needs in the community of transplantation.

Moreover, the cost of acquisition is modest, and it does not materially alter the CSL’s profit anticipation for the fiscal year 2020.

The terms include sales-based milestones and CSL would incur further research and development expenditures related to the completion of Phase 3 clinical study. In the fiscal year 2021, these additional costs are projected to be in the range AUD 30 – AUD 50 million.

ALSO READ: How is the Global Biotech Player CSL Limited Responding to COVID-19?

Partnership with CEPI and the University of Queensland

On 5 June 2020, CEPI*, CSL and University of Queensland (UQ) announced a new, significant partnering agreement for increasing the development, manufacturing as well as the distribution of a COVID- 19 vaccine candidate which has been founded by scientists at University of Queensland.

With this partnership, CSL and CEPI would fund the development, as well as manufacturing, of molecular clam enabled vaccine for COVID- 19 by University of Queensland. The funding contributions shall be utilised to offer support for the pending safety Phase 1 clinical trial being conducted by the University followed by subsequent late-stage clinical trials, and industrial-scale manufacturing to permit the making millions of doses per year, should the product be approved.

If the clinical studies are successful, the vaccine to combat COVID-19 is expected to be accessible in 2021.

Stock Information:

CSL stock was trading at AUD 288.680, up by 3.655% on 10 June 2020 (at 2:48 PM AEST), with a market capitalisation of AUD 126.45 billion. The Company has an annual dividend yield of 1.05% and a P/E ratio of 43.940x.

Cochlear Limited (ASX:COH)

ASX-listed medical device player Cochlear Limited is into manufacturing, development and distribution of implantable hearing solutions for offering a lifelong of hearing outcomes.

On 11 May 2020, Cochlear provided an update to current trading conditions and disclosed that significant decline in surgeries across major markets had materialised as per anticipations.

Cochlear has continued to invest in the R&D pipeline with most projects progressing to schedule, including products currently in the regulatory approval process. Cochlear’s liquidity position has been strengthened through the AUD 1.1 billion capital raising and AUD 225 million increase in debt facilities.

The Company disclosed that implant surgeries are restarting in some major markets, although the rate of recovery at this early stage is unclear. However, Cochlear remain to anticipate many of the delayed surgeries to progress after hospitals resume routine operations.

Outlook

The Company stated that on the positive side, implant surgeries are resuming in some main developed markets, including Australia, the United States and Germany. However, it is very early at this stage to comprehend the recovery rate with the continuation of surgery anticipated to differ by surgeon hospital and nation.

While the resumption of elective surgeries is positive, commencing ahead as per the anticipations of Cochlear, the Company caution that there is still a risk, noting that Japan and Singapore have recently restricted elective surgery following an increase in the COVID-19 infection rate.

Cochlear stated that this time required to be careful in assessing progress as second waves of infections and restrictions might occur in more markets, complicating recovery plans and timing.

Stock Information:

COH stock was trading at AUD 193.460, up by 0.238% on 10 June 2020 (at 2:48 PM AEST), with a market capitalisation of AUD 12.68 billion. The Company has an annual dividend yield of 1.74% and a P/E ratio of 36.460x.

Collins Foods Limited (ASX:CKF)

Queensland, Australia-headquartered company Collins Foods Limited manages foodservice retail outlets. Currently, the Company operates nearly 240 KFC restaurants throughout Australia in Queensland, New South Wales (NSW), Victoria, South Australia, Tasmania, Western Australia, and Northern Territory. Also, CKF operates nine Sizzler companies as well as twelve Taco Bell restaurants owned restaurants in Australia.

Collins Food Appoints Drew O’Malley As CEO

On 9 June 2020, Collins Foods revealed the appointment of Drew O'Malley as new CEO of the Group effective 1 July 2020. Commenting on his appointment to the CEO role, Mr O’Malley stated that-

Mr O’Malley joined Collins Foods in 2017 as COO and as a key member of the executive management team since that time he has made an outstanding contribution to the Company.

COVID-19 Update:

On 5 May 2020, Collins Foods provided the update on the impact of the global pandemic on the business and sales of the Company specifically from the period of 30 March to 3 May 2020.

KFC Australia continued to demonstrate improvements in sales trends during this difficult period of crisis. Over the last five weeks of the financial year 2020 from 5 May, SSS (same store sales) were down marginally (-0.9% versus previous year).

In Germany, KFC restaurants of Company continue to trade through take-away, drive-thru and delivery channels while certain Government restrictions have decreased the dine-in sales.

Moreover, the balance sheet of Collins Foods remains robust, and CKF has substantial headroom in its existing debt facilities.

Stock Information:

CKF stock was trading at AUD 8.270, up by 0.854% on 10 June 2020 (at 2:48 PM AEST), with a market capitalisation of AUD 955.97 million. The Company has an annual dividend yield of 2.44% and a P/E ratio of 25.180x.