A bit of plagerism As mentioned by FNArena yesterday (See: No...

A bit of plagerism


As mentioned by FNArena yesterday (See: No Talecris No Reason To Be Negative On CSL, 26/05/09) Bank of America-Merrill Lynch had yet to update its views on CSL (CSL) after it became apparent the company's proposed acquisition of Talecris in the US would not be approved by regulators. The broker has now rectified the situation, with the good news for shareholders being BA-ML still considers the stock to be a Buy.

On its numbers, the removal of the Talecris acquisition generates reductions in earnings per share (EPS) forecasts of 9% in FY10 and 12% in FY11, which translates into a reduction in the broker's share price target to $42.90 from $48.80 previously.

Even allowing for this earnings growth for FY10 is still expected to be 21%. With the stock trading on just 14x FY10 estimated earnings BA-ML analysts believe CSL remains worthy of a Buy, especially given a share buyback is now likely and should provide a boost to EPS going forward.

As well, the broker sees scope for alternative acquisitions for the company in areas such as immunology or via pick-ups from any divestments resulting from the Merck/Shering Plough and Pfizer/Wyeth deals in the US. The broker does point out these deals are unlikely to deliver as high a multiple premium as the Talecris acquisition given that deal would have consolidated the global blood plasma industry.

Deutsche Bank equally released a research update on the company today, but Deutsche remains at Hold. Deutsche Bank analysts already went through the motions regarding the blocked Talecris deal yesterday and today point out CSL might be one of few beneficiaries of a US Government order for swine flu trials. Plus the company's supply contract with the Australian Government could be material in an earnings sense. Deutsche Bank estimates flu vaccines in Australia alone could add as much as $300 million in additional revenues if the company were to supply enough flu vaccine doses for the entire Australian population.

Post the Bank of America-Merrill Lynch result, the FNArena database shows CSL rated as Buy seven times and Hold twice, with the average target now $39.15, down from yesterday's $39.89. Shares in CSL this morning are slightly higher and as at 10.50am the stock was up 14c at $30.05.