PM Capital Australian Companies Fund on CSL Limited
Thesis
The fund initiated a small position in CSL while the company is undergoing a broad operational and leadership reset. PM Capital believes growth plans and the cost base need to be resized, commercial execution improved and permanent leadership established. It also recognizes challenges at Vifor and the mixed economics of plasma therapies, which combine capital-intensive production with high-value therapeutics. Despite those issues, the fund believes a valuation of roughly 10-11 times earnings does not adequately reflect CSL's barriers to entry and growing end-market demand.
“Equally, we do not believe a valuation of 10- or 11- times earnings appropriately reflects a business with high barriers to entry and a product for which there is growing demand.”
Key risks
- Execution risk around resizing growth plans, costs and commercial operations
- Leadership uncertainty while a permanent chief executive and new board chair are established
- Vifor could deteriorate faster than expected