06
Aug

CSL bursts through the $100 barrier

CSLCSL became the only stock in Australia to be trading above $100 on Tuesday 4th August. CSL was previously known as Commonwealth Serum Laboratories and started operating as a government vaccine manufacturer at the Melbourne Hospital in 1916. CSL was privatised and listed on the ASX on 4th June 1994.

CSL is a remarkable success story. Originally, the business was known as Commonwealth Serum Laboratories. The stock listed with the abbreviated CSL name at a price of $2.30 per share but given the stock was split on 1 for 3 basis in 2007, the historical base is only 76 cents. Initial investors, and there are a lot of them, have turned 76 cents into $100 over 21 years. An initial $1,000 invested is now worth $131,600 before dividends.

CSL has achieved success thanks to a management team led for many years by long serving CEO Brian McNamee. McNamee retired in 2013 and was replaced by Paul Perreault. CSL has made a series of astute global acquisitions including ZLB Bioplasma AG in Bern Switzerland in 2000, the German Aventis Behring in 2004 and recently the influenza vaccine business Novartis in 2014. Another acquisition in 2008 of US plasma company Talecris  was thwarted by regulatory authorities. CSL has reshaped the global blood products industry by absorbing competitors and concentrating on incremental process improvement consistently for over two decades. Members of our team were at AMP in Sydney when CSL listed. We remember McNamee raising money from institutions in 2000 to build a global business when the share price was todays equivalent of only $7.

Quest portfolios purchased CSL shares in our first few months of business back in 2005 at an equivalent price of $10.18. We already had a decade of experience with the business while at AMP. We have always held the shares since 2005 on behalf of our clients. CSL is rated an “A” grade stock in our internal filters and has a habit of exceeding expectations over the years. There have been only a few setbacks in that time. The ongoing stock buyback, driven by the highly cash generative blood products business, has seen shares on issue decline steadily over recent years while lifting the share price. The buyback tactic has also enhanced shareholder return by adding value to existing holdings that benefit from the 50% tax concession. CSL also pays an unfranked dividend.

CSL continues to benefit from a weakening Australian dollar and has been very strong in recent weeks leading up to the annual result. Perhaps a little too strong! History shows, however, that great business models reward shareholders over the longer term regardless of short term fluctuations.