Kick Off: CSL Limited v Ramsay Health Care Limited

Facing off in the healthcare pool (a particularly strong pool), CSL Limited (ASX: CSL) will take on Ramsay Health Care Limited (ASX: RHC) in a much-anticipated first round match of the ASX World Cup.

Pre-match commentary and stats

CSL owns the world’s biggest distribution network for blood plasma products and is at the fore when it comes to protein science research. This ensures a steady supply of new medicines and the distribution network to sell products, old and new, come rain, hail, or shine.

Meanwhile, Ramsay Health Care owns a collection of private hospitals in Australia and abroad. Just as the company started with psychiatric hospitals in Australia, they will form an important part of the international expansion (particularly in France). Indeed, the move into France seems clever given that the country is well insured by both private operators, and a public healthcare system.

CSL Ramsay Health Care
Market Capitalisation $32.45 billion $9.27 billion
Forecast FY 14 P/E ratio 22.13 28.07
Forecast FY 14 Yield 1.89% unfranked 1.83% fully franked
FY 2013 Cashflow Yield 4.15% 4.76%
Net interest cover 81.19 7.41

Notes: Thompson Consensus Forecasts, and based on last FY reports.

Kick Off

When it comes to price, it is too close to call. Ramsay boasts a slightly better cashflow yield, and a better dividend, thanks to franking credits. However, with a P/E ratio of 28 compared to 22 for CSL, the hospital operator fails to put CSL’s defence under sustained pressure.

CSL turns the tables on Ramsay when it comes to debt. Not only can CSL more easily afford its interest payments, but it is less geared and has a lower debt/equity ratio. However, Ramsay holds up under scrutiny: after multiple shots at goal CSL simply cannot beat the goalkeeper who is dancing with the grace of Mexican star Guillermo Ochoa.

The score remains locked at 0 – 0.

Ramsay looks good after kick off thanks to strong growth prospects resulting from recent acquisitions (and the ageing population).

Before too long, Ramsay scores a goal with an excellent header from a corner kick.

1 – 0 to Ramsay Health Care.

However, CSL looks good too as its constant flow of products boosts revenue and the company’s competitive advantage grows with every passing year. Striker (and CEO) Paul Perreault volleys a beautiful cross, straight into the top right corner: the equalizer takes the star Ramsay goalkeeper down a peg.

And the score remains at 1 – 1 when the final whistle sounds.

Both CSL and Ramsay Health Care are already priced for perfection - neither could score on price. In comparison, this growing company is still a bargain.

Indeed, at least 2 directors have, within the last 6 months, purchased shares in this growing company at very close to the current share price. Better yet the CEO owns over 15%!

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Motley Fool contributor Claude Walker (@claudedwalker) does not own shares in any of the companies mentioned in this article.

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