CSL blood in the water only from a paper cut

CSL chief Paul Perreault says there’s a pattern to the blood therapeutics group’s profit disclosures.

Nanosonics

CSL (CSL) $110.84

Now in his fourth year as CSL chief, Paul Perreault says there’s a pattern to the blood therapeutics group’s profit disclosures.

The company releases “fantastic” results and the shares sink because they have not quite met expectations.

After the customary post-­result powwows with the investors and brokers who matter, equilibrium is restored.

Indeed, yesterday’s 5 per cent selldown looks like another over-reaction given the robust double-digit growth within CSL’s cash cow Behring plasma division.

Now the bourse’s seventh-biggest stock, CSL reported a 10 per cent decline in reported full-year earnings to $1.242 billion, but the result was 5 per cent higher in underlying “constant currency” terms.

CSL has guided to 11 per cent net profit and 14 per cent EBITDA growth for the current year. That seems healthy, but brokers were expecting a frisson more on EBITDA and a lot more on the (messier) net profit metric.

The other source of angst is the rebranded Seqirus flu drug division, the second-biggest global player after last year’s purchase of Novartis’s flu vaccine assets.

Perreault, who rues that everyone wants to talk about Seqirus even though it delivers only 10 per cent of earnings, says the division should turn a profit by 2018. Behring has its issues with perkier ­rivals, but its key immunoglobulin portfolio powers on with its Hizentra (subcutaneous) variant boosting sales by 31 per cent.

Perreault says CSL’s main growth impediment is access to more blood, bearing in mind that the company is already 20-30 per cent more efficient than its US collection rivals.

For 139,000 investors sneezing after CSL’s flu glitch, it’s a case of keeping the Kleenex handy and having a good lie down. Long-term buy.

BHP Billiton (BHP) $20.91

Frankly, investors should ignore newspaper headlines after a profit result, which in BHP’s case trumpeted the miner’s record loss of $US6.4bn ($8.27bn).

Just as no head tech geek has been sacked for choosing IBM — until last week at least — no ­finance scribe has ever been fired for highlighting the most embarrassing big-ticket number.

Fair enough, too, given that the horror (sorry) loss was the official number endorsed by the accounting police.

Drilling deeper — sorry again — BHP’s underlying trends were actually better than expected, with the glaring exception of the dividend.

The commentariat highlights BHP’s current-year free cash flow of $US7bn. With no new major projects slated, this could be used to reduce debt or top up divs — progressively of course.

The commodities gods willing, BHP should enjoy a leg-up this year as its petroleum and coal operations return to profits.

Much depends on one’s view of iron ore, the main contributor. “BHP is somewhat of a conundrum for us,’’ Citi says. “On the one hand we are optimistic on the outlook for oil and copper, but on the other we expect iron and coal to fall as … growth in China slows.’’

Don’t lose too much sleep, guys. Long-term buy.

Nanosonics (NAN) $2.80

The medical device market is sizzling, as evidenced by three companies fronting the market this week.Nanosonics, which makes a sterilising unit for bodily probes, unveiled a maiden full-year profit of $122,000 and a second-half profit of $3.4 million.

Nanosonics has sold 10,000 of its so-called Trophon units globally, 8700 to US hospitals.

Uscom (UCM, 33c), which sells cardiovascular monitoring devices, doubled quarterly sales to $2.56m and recorded cash inflows of $2.3m. Concussion tester CogState (CGS, 76c) returned to profits with a $2.6m surplus, on revenue of $27m (up 69 per cent).

CogState reports contracted revenue of $34m, $17m of which should be recognised in the current year. Speculative buys.

RXP Services (RXP) 77c

The IT people wrangler has helped mend the sectoral damage inflicted by peer CSG, which missed guidance on Monday and by more than Maxwell Smart’s “that much”. RXP posted earnings (EBITDA) of $18.2m on revenue of $127m, up 71 per cent and 61 per cent respectively.

RXP chief Ross Fielding guides to 10-15 per cent earnings and revenue growth for the current year, which our man in the mainframe reckons equates to earnings per share of 10c and a 4.5c div.

Valued at less than eight times RXP looks cheap compared with other listed IT acronyms including SMX, DWS and ASG.

With a $100m market cap, RXP is too small to garner serious investor attention, despite Fielding’s credentials as a former Telstra heavy and brother of erstwhile Family First senator Steve.

Is there scope for more rationalisation given US giant Computer Sciences recently took out UXC for $420m, equating to a multiple of 18 times earnings?

We first rated RXP a long-term buy in March 2013 at 71c apiece and investors should retain their patient stance.

The Australian accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser. The author owns CSL, BHP and RXP shares.