Talking Top Twenty: National Australia Bank (NAB.ASX) & ANZ (ANZ.ASX)
Talking Top Twenty: BHP (BHP.ASX) & Fortescue (FMG.ASX)
Talking Top Twenty: Rio Tinto (RIO.ASX), Woodside (WPL.ASX) & Newcrest (NCM.ASX)
CSL Ltd (CSL.ASX)
Getting to the numbers, group revenue was up +4% to $6.041bn while NPAT declined -5% to $1.427bn over 1H22. Looking closer, of particular concern was declines in albumin (immunoglobulins) in the EU and less then stellar numbers in the US, though China has seemingly offered some respite. This is one number we will continue watching. On the other hand, specialty was rather pleasing with sales up +2% and hospital products back to pre-pandemic levels.
Overall, while results are mixed, we think that management has been doing a competent job on delivering in an increasingly competitive environment with added supply constraints (Covid-related). With that in mind, CSL presents as a good allocation in any portfolio over the long run with forecasted high single to double digit revenue growth along with a stellar R&D pipeline, the most interesting being a licence agreement for a late stage haemophilia B gene therapy candidate.
Expectations: The company continues to be a long-term hold in our view. Target: AU $280.
Dividend Yield: 1.11% assuming a share price of AU $262. Expectation remains that dividends continue to grow at double digits over the long-term.
Wesfarmers (WES.ASX)
While the Covid-related operating environment has been a little messy for brick and mortar retailers, we still didn’t expect the results that were put forward. The one upside was the CEF business; this is one positive aspect of having a conglomerate structure (if done well). Fertilizer revenue in particular growing +35.6% to a AU $183m. On the positive side, we do expect the numbers to stabilise given a rather buoyant consumer propelled by generous stimulus and a still expansionary monetary policy. That said, the business does seem overvalued at 27x earnings despite the sell off.
Expectations: Disappointing overall, at the time of our previous examination we were particularly positive on management’s vision. The business seems to be a little shaky and the lack of disclosure and self-congratulatory nature in which a less then pleasing result was couched didn’t help. In any case the business remains overvalued in our view.
Dividend Yield: 3.36% assuming a share price of AU $48.51. Expectation is that this will stay stable on a nominal basis.
Woolworths Group (WOW.ASX)
Getting to the numbers, EBIDTA down -6% to AU $2.485bn while sales was up +8% to $31.814bn. This may seem less than stellar but it showcases the nature of the issues faced by the business; it would be rolling off a particularly high comparable half in 2020 (Covid-related hoarding and short term spike) as well as major supply chain disruptions. What was pleasing is the reduced inventory turnover and clear strategy on the part of management in terms of omnichannel.
All that said, food retail remains a competitive business in Australia, especially given the Coles-Ocado deal along with increased market share taken by the likes of Aldi. We feel that the wiser focus would be in regional and sub-regional along with a focus on convenience. This will be especially hard for pure-play online retailers and newer entrants to replicate.
Overall, management continues to deliver on its outlined strategy and we remain convinced that it has a better investment thesis/case than Coles.
Expectations: Top notch management that continues to deliver and offers a considerable inflation hedge for a portfolio. Strong earnings stability while future upside will be contingent upon cost efficiencies in logistics and supply chain.
Dividend Yield: The current yield stands at 2.6%, assuming a share price of AU $48.51.