Already leading the healthcare pool CSL Limited (ASX: CSL) is looking to secure top spot going into the finals of the ASX World Cup, with a win against Sonic Healthcare Limited (ASX: SHL). Sonic requires a victory to keep its finals hopes alive.
Pre-match commentary and stats
CSL owns the world's biggest distribution network for blood plasma products. The company's significant ongoing R&D ensures a steady supply of new medicines and it already has the distribution network to sell products, old and new, come rain, hail, or shine. The company returns capital to shareholders through buying back its own shares as well as a modest dividend.
Sonic Healthcare is a major provider of pathology and radiology services in Australia. However, almost half of its business comes from overseas; the company owns pathology practices in New Zealand, the United Kingdom, the USA, Germany, Switzerland, Belgium and Ireland.
| CSL | Sonic Healthcare | |
| Market Capitalisation | $31.82 billion | $6.9 billion |
| Forecast FY 14 P/E ratio | 21.7 | 17.8 |
| Forecast FY 14 Yield | 1.92% unfranked | 3.9% partially franked |
| FY 2013 Cashflow Yield | 4.22% | 6.65% |
| Net interest cover | 81.19 | 8.08 |
Notes: Thompson Consensus Forecasts, based on last FY reports.
GAME ON
When it comes to price, neither team is overly dominant, as both are quite expensive. However, with a generous dividend yield of 3.9%, higher cashflow yield and a lower forecast P/E ratio, Sonic Healthcare has the edge.
Sonic CEO Dr Colin Goldschmidt uses his experience as a pathologist to streak past CSL defenders. He scores a goal in the bottom right corner, making it 1 – 0 to Sonic!
When it comes to growth it is difficult to separate the teams. CSL's dominance of its industry, access to blood supplies and distribution network virtually ensures the company will grow profits over the long term. Even more so than CSL, Sonic Healthcare will benefit from the ageing population, as elderly people get sick more easily. Many will need Sonic's diagnostic services. With a market capitalisation of under $7 billion, it will be easier for Sonic to grow.
CSL's extremely strong cashflows look threatening, and in the end its high and growing return on investment upsets Sonic defenders and new CEO Paul Perreault scores with a header.
The score is still locked at 1 – 1 at full time, putting an end to Sonic's hopes of progressing.
