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Where to go when you're at the apex


Date: August 25 2005


By Stephen Bartholomeusz


Chip Goodyear and Brian McNamee are sitting on top of their respective mountains and the views, while different, are spectacular with few clouds on the horizon. Having got there, by similar routes, however, both now have to decide what to do next.


Goodyear has the superficially easier task...........................................................................................


Beyond the windfall gains of the super-cycle, however, Goodyear will have to decide if there is a strategy beyond the organic growth which has under-pinned recent results. WMC will help, adding considerably to the bulk of the group and its development options. Should BHP look for other, bigger, acquisitions or start shovelling the windfall elements of its results to shareholders?


McNamee faces a similar conundrum. Like BHP, CSL has been made on a brave strategy. McNamee bet his company twice in three years with the $1 billion purchase of Swiss-based ZLB in 2000, then the near-$1 billion Aventis Behring in the US.


That second deal was particularly bold, given the plasma market had been undermined by over-capacity and uncommercial behaviour. It enabled CSL, however, to remake the industry, influence the supply/demand balance and emerge as a leader in a key niche within the global bio- pharmaceutical sector.


Those deals, and their execution, completed CSL's transformation from the operator of a plasma plant with loosely related but modest businesses into a specialised global business. They were responsible for a doubling of CSL's earnings from continuing businesses to $317 million - roughly its market value when privatised just over a decade ago.


The strength of CSL has enabled McNamee to more than give back the $550 million of capital he raised as insurance against the financial risk of the Aventis acquisition - he has returned $600 million to shareholders - while paying increased dividends and reducing net debt by $194 million.


As with BHP, there is a windfall element to the surge in CSL's profitability and cash generation. When it acquired Aventis it bought inventory at a $US200 million- plus ($267 million-plus) discount to fair value. It has been able to sell that inventory and realise most of the discount without undermining the market in the process. Prices have firmed.


McNamee's challenge, and one probably more immediate than Goodyear's, is what he does next.


CSL has completed its journey and created a global business. It doesn't need another acquisition to fill out its business platform. It does plan to plough more cash into its research and development but with underlying cash flows (excluding inventory sales) of $370 million and rising, and gearing of only 12.7 per cent, it will have more cash than it can spend within industry segments it has targeted.


McNamee, however, remains ambitious. CSL has had significant successes within its research arm but has chosen to partner with global majors to exploit the discoveries commercially.


It is an indication of CSL's confidence and financial capacity that the next phase of its development is not only about expanding the R&D pipeline but CSL itself taking the risk and cost - and rewards - of exploiting its successes.


It now has the financial and operational capability, and physical presence, to be confident it can take its products through the expensive trials needed to obtain approval in the US and Europe to market them and then manage their marketing and distribution.


The transformations of CSL, and BHP Billiton, are two of the more remarkable corporate transformation stories of the past half-decade - Australian companies that have successfully and rapidly remade themselves as global majors in their sectors.













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In reply to: drrc on Wednesday 24/08/05 10:17pm

no i think profit results were built into the price

& dumb ass guys like me would have sold the reversal,

also healtcare stocks in the 'states' were down pretty hard

the night b4


also there is a bit of a rotation going on ,ie shl,rmd,dvc etc

That said the healtcare sector is looking good

over time the correlation between higher energy costs

& rising healtcare stocks is uncanny


hysteria only lasts a couple of days ,CSL still looks

the go to me


but hey ,im often wrong http://www.sharescene.com/html/emoticons/wink.gif

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In reply to: will_smith on Thursday 25/08/05 08:48am



Macquarie Stays Keen On CSL


Thursday, August 25, 2005 8:18:21 PM ET

Dow Jones Newswires




1013 [Dow Jones] STOCK CALL: Macquarie keeps Outperform rating on CSL (CSL.AU) after FY05 result yesterday met expectations; "While it may not appear to be an outlook that would set the world on fire, a 10% EBITA growth target into the current inventory profit headwind equates to more than a 70% increase in underlying operations." Expects milestones from HPV vaccine to drive stock over next 12 months. Has A$38.50 price target vs latest at A$34.37, off 1.7%. (RJN)





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In reply to: badger on Thursday 25/08/05 10:45pm

Citigroup Stays Bullish On CSL, Ups Target


Thursday, August 25, 2005 9:02:29 PM ET

Dow Jones Newswires


1101 [Dow Jones] EARNINGS WATCH: Citigroup raises price target on CSL (CSL.AU) to A$42.27 from A$41.99, keeps Buy rating after FY05 result beat guidance yesterday; notes target increased due to lower debt and updated peer multiples. Adds looming approval of liquid product should bring significant upgrades to medium term estimates. CSL up 1.3% at A$35.45. (RJN)





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Bloody Good Prospects For CSL

September 07 2005 - Australasian Investment Review ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ (AIR)


ThereÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s no need to guess who is the most bullish local equity expert on blood producer CSL (CSL) with healthcare analysts at Smith Barney Citigroup letting no opportunity pass them by to air their rosy opinions on the company.


CitigroupÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s team still holds the highest price target in the market at $42.27, but now ABN Amro Morgans have positioned itself as the undisputed second, beating Merrill Lynch with an updated price target of $40.27.


It is ABN Amro MorgansÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢ view that the outlook for CSL continues to improve, with upside seen as possible from the companyÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s blood clotting operations.


This section of the business is more significant following the acquisition of Aventis-Behring in 2004, with the broker estimating it will account for 44% of total company revenue in FY06.



The broker notes both developed and developing markets are increasingly using blood clotting products, of which the company has two types, supporting the view that CSLÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s outlook remains favourable.


Volume increases should lift revenue from the products, though the broker notes its current conservative assumptions donÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t factor in any price rises. Margins in each product are believed to be 22%-24%.


Assessing different scenarios, ABN derives a valuation range on the stock of $36.06-$44.41, noting this is above the current share price even in a worst-case outcome.


Six out of ten leading equity experts in Australia rate the shares Buy, three others Neutral, while GSJB Were stands out with an Underperform/LT Hold rating.


According to Thomson One Analytics, the median price target is currently $38 for the stock, while the mean FY06 EPS forecast is for $1.51 compared with last yearÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s $1.61.





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ABN AMRO Morgans Lifts CSL Target


Monday, September 12, 2005 8:32:08 PM ET

Dow Jones Newswires




1031 [Dow Jones] STOCK CALL: ABN AMRO Morgans keeps Buy recommendation on CSL (CSL.AU); lifts target price to A$40.28. Sees upside from shift in recombinant clotting factors in developed world, and increasing sales of plasma-derived clotting factors into developing world. Has growing confidence in revenue growth from rFV111 franchise medium-longer term. Lifts growth assumptions for rFV111 to 8% in FY08 and 5% in FY09. Sees upside risk to forecasts. CSL last down 2 cents at A$34.73.





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Citigroup Lifts CSL Target To A$42.96


Friday, September 16, 2005 8:16:44 PM ET

Dow Jones Newswires


1013 [Dow Jones]STOCK CALL: Citigroup raises price target on CSL (CSL.AU) to A$42.96 from A$42.27 after updates forex forecasts, completes plasma pricing survey for 3Q; broker says survey shows supply is "very tight," noting many hospitals unable to obtain adequate supply. Adds no major IVIG price change, but says Albumin prices are surprisingly up strongly. Also says there's talk of new collection centers opening. Keeps Buy rating on CSL, which is up 1.3% at A$36.10. (RJN)





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Hi Guys, Especially drcc for all the reports. Brokers predicting $40 is certainly interesting; remember it has been to $50 before it crashed. Couldnt see why then and cant see it roaring down in current climate.

Neverthe less the old CGT burden may hold some in who dont have their holding in super type vehicles.

Gee it should stay a nice solid stock in 2006



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