CSL Limited (ASX: CSL) is a global biotechnology manufacturer that researches, manufactures and markets products to treat and prevent serious human medical conditions such as bacterial diseases and bleeding disorders.

CSL is operationally split into two divisions: CSL Behring and Seqirus. CSL Behring mainly focuses on the manufacturing and marketing of plasma products and research into plasma and non-plasma biotherapies. Seqirus is the second-largest influenza company in the world and focuses on supplying seasonal influenza vaccine.

CSL posted impressive results in FY17 with revenue increasing 15% to US$6.9bn and underlying net profit after tax increasing 24% to US$1.3bn on a constant currency basis. Breaking this down further, CSL Behring's revenue increased by 11.9% to US$6bn and Seqirus's revenue increased 23% to US$0.9bn.

CSL Behring

In FY17, there was strong growth in immunoglobulin sales as they increased by 16% on a constant currency basis. Immunoglobulins, also known as antibodies, are derived from plasma and administered to patients who need protection against bacterial and viral infections because their immune system isn't functioning effectively.

The growth in immunoglobulin sales was driven by sales growth in two popular immunoglobulin products: Hizentra sales increased by 10%, and Privigen sales grew 21%.

Also, CSL opened 28 plasma collection centres in the FY17 which adds to its already extensive network of plasma collection centres. CSL's network of plasma collection centres and fractionators means that CSL can increase production of immunoglobulins when demand for immunoglobulins spikes. CSL is currently the leader in the immunoglobulin market and its network of plasma collection centres and fractionators places it at a significant advantage in comparison to other plasma companies that often experience capacity constraints.

Seqirus

Seqirus is a division composed of CSL's acquisition of the influenza vaccine operations of Novartis and CSL's own influenza vaccine business. Although Seqirus's revenue grew by 23% in FY17, it has yet to break even, although management is forecasting that Seqirus will break even in 2018. This will likely be achieved as recent data released by the U.S. Food and Drug administration revealed that Seqirus increased its share of U.S. flu vaccines to 50% because of a severe flu outbreak.

The post Why the CSL Limited share price just hit another record high appeared first on The Motley Fool Australia.

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The a2 Milk Company Ltd (ASX: A2M) share price climbed 2.4% to $7.60 on the back of the company announcing that it will expand its presence in the US by entering the north-east region from January 2018.  

Entering the north-east region of the US will allow A2 Milk to increase its presence in US retail stores by approximately 39% from 3,600 retail stores to 5,000 retail stores. Moreover, the strategic decision to enter the region will be complemented by investment in the 'Love Milk Again' advertising campaign which aims to raise customer awareness of A2 Milk's products.  

The A2 Milk Company is a business involved in manufacturing, marketing and selling dairy and infant milk products in various regions including Australia, New Zealand, China, US and the UK.

The key difference between A2 Milk and normal milk is that A2 milk only contains A2 protein in comparison to normal milk which contains both A1 and A2 protein. Research has shown that the A2 protein is easier to digest than the A1 protein and the A2 Milk Company has invested extensively to protect its IP.  

In FY17, A2 Milk reported revenue of $549.5 million and net profit after tax (NPAT) of $90.6 million dollars. This was an impressive achievement because revenue increased by 56%, while NPAT increased by 198%.

Breakdown of FY17 revenue reveals that 80% of revenue was generated from the Australia & New Zealand region, 16% of revenue was from the China & Asia region and only 4% of revenue came from the US & UK region. However, through A2M's strategy of expanding its distribution in US retail stores and advertising campaigns to build brand awareness, it's expected that revenue from the US & UK region will continue to grow and make up a greater proportion of total revenue.  

Foolish takeaway 

As A2 Milk invests heavily in other regions such as the US & UK, this will allow A2 Milk to grow and diversify its revenue stream. This will be supported by strong growth in existing markets such as the Chinese market where there is a growing middle class.   

The post Why I think a2 Milk Company Ltd could be a buy for capital growth in 2018 appeared first on The Motley Fool Australia.

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Afterpay Touch Group Ltd (ASX: APT) is a technology payments company that allows its customers to buy a product now and then pay for the product later through four fortnightly payments.

This service is advantageous for the customer because fortnightly payments align with their fortnightly pay cycle and they pay no interest on their purchase. Instead, Afterpay Touch makes its revenue from charging the merchant a fee.  

Q2 FY18 Business Update 

In the Q2 FY18 business update, Afterpay Touch revealed that Q2 FY18 underlying sales were $551 million which represented a 50% increase on Q1 FY18 underlying sales.

Also, underlying sales for the first half of FY18 were $918 million which means that underlying annual sales for FY18 will exceed $2 billion if quarterly underlying sales continue to increase at the same rate.  

Also, Afterpay Touch has shown that it can effectively manage its bad debt as it revealed that the net transaction loss for the first half of FY18 is expected to be less than 0.8% of underlying sales.

This demonstrates that controls such as an account limit of $1,000 for each customer have been able to effectively mitigate the risk of bad debts. However, it must be noted that Afterpay Touch's business model hasn't experienced the full economic cycle and it's possible that a recession will dramatically increase bad debts which could diminish Afterpay Touch's margins.  

Also, a Goldman Sachs research note raised an interesting point about the hidden value of customer data that is collected by Afterpay Touch.

Analysis of this consumer data would be able to reveal insights about consumer buying behaviour which further strengthens Afterpay Touch's value proposition to merchants. Moreover, the network effect will accelerate as more merchants start implementing the Afterpay platform. 

Expansion into the US market 

An announcement stated that Afterpay Touch is currently examining the possibility of entering the U.S. market. Afterpay Touch already has a proven track record of being able to successfully launch in a foreign market as shown by its successful New Zealand launch in the second half of FY17. Moreover, the opportunity to expand into the U.S. market has arisen because Afterpay Touch has recognised that factors such as millennial shopping trends in the U.S. are similar to those in the ANZ market.  

Foolish takeaway 

The Afterpay platform is continuing to grow strongly in the Australian market. Also, the possibility of entering the U.S. market means that there is potential for more upside with Afterpay Touch. Broker Bell Potter reportedly has a price target on the stock significantly above today's valuation.

The post The Afterpay Touch Group Ltd share price is going gangbusters again appeared first on The Motley Fool Australia.

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The Mayne Pharma Group Ltd (ASX: MYX) share price climbed 6.8% on Monday despite the company making no announcements. As there is a strong correlation between the share prices of Teva Pharmaceuticals and Mayne Pharma Group, it's believed that the rally in Mayne's share price can be attributed to upward movements in Teva's share price.   

Mayne Pharma Group is a pharmaceutical company focused on the production of generic pharmaceutical products. Generic pharmaceutical products comprised 78% of total revenue in FY17, while the US region accounted for 94% of total revenue in FY17.  

Mayne Pharma Group recorded net profit after tax (NPAT) of $88 million and revenue of $503 million in FY17.

This means that NPAT increased by 137%, while revenue increased by 114% in FY17. The substantial increases in revenue and NPAT were predominantly the result of two major acquisitions, being the acquisition of 42 generic products from Teva/Allergan and the acquisition of dermatology foam products from GSK.  

However, a major headwind facing Mayne Pharma Group is the price declines of generic drugs. This price deflation has been driven by several factors such as the low barriers to entry associated with the generic pharmaceutical industry and the consolidation of wholesalers which has increased their buying power.

Moreover, the price declines are expected to continue into the foreseeable future which means that Mayne Pharma Group has to continually invest in research and development to develop new generic drugs to alleviate the earnings shortfall created by the price deflation of generic drugs. 

The post Why have Mayne Pharma Group Ltd shares performed so well in 2018?  appeared first on The Motley Fool Australia.

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The Evolution Mining Ltd (ASX: EVN) share price climbed 6.64% on Monday to finish the day at $2.73 on the back of gold hitting a four-month high last Friday.

As there is an inverse relationship between the gold price and the US dollar, the gold price was able to hit a four-month high because the US dollar was trading at close to three-year lows last Friday.  

Evolution Mining is a mid-tier gold miner that extracts and processes gold from its six wholly-owned Australian mines.

These six Australian mines are composed of one mine in NSW, three mines in Queensland and two mines in Western Australia. Also, Evolution Mining holds an economic interest in the Ernest Henry mine in Queensland. 

Evolution Mining made a net profit of $217 million in FY17 on the back of revenue increasing by 11% to $1,479 million.

All In Sustaining Costs (AISC) per ounce decreased by 11% to finish at A$907, which meant that Evolution Mining has been able to reduce its AISC for six consecutive years.

Also, Evolution Mining's AISC is considerably lower than other gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST).

This downward trend in AISC is expected to continue in FY2018 as Evolution Mining becomes one of the world's lowest cost gold producers. Moreover, total gold production in FY17 increased by 5% to 844,124 gold ounces.  

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Although TPG Telecom Ltd (ASX: TPM) cut its final dividend to 2 cents per share and forecast a decline in earnings for FY2018, this was overshadowed by TPG announcing that it has exceeded FY2017 guidance with underlying revenue growing by 4% and underlying EBITDA growing by 8%.

Moreover, shareholders responded positively to news that TPG was able to increase its debt facilities by a further $750 million. This allows TPG to fund its capital expenditure on its mobile network and spectrum through debt rather than equity resulting in a positive outcome for shareholders as their shareholding is unlikely to be diluted by a capital raising.

However, a major headwind facing the telecommunications industry in Australia is the rollout of NBN which will compress margins for all players. This is reflected in TPG's forecast that FY2018 EBITDA will fall to between $800-$815 million as a result of approximately 400,000 – 500,000 fixed line subscribers shifting to the NBN.

TPG will have to pay a higher connection fee for access to the NBN in comparison to the connection fee it paid to lease copper wires, which results in an increase in wholesale costs and a lower EBITDA margin.

The EBITDA margin is expected to fall even more dramatically over the next few years as more customers migrate to the NBN. However, as households are forced to migrate to the NBN over the next few years, this will increase the customer churn rate for other ISPs which provides an opportunity for TPG to gain market share by providing a lower priced option.

Moreover, TPG is exploring other opportunities to offset the margin declines in its broadband business. These include constructing a 4,000-km fibre network for Vodafone and rolling out mobile networks in Singapore and Australia. This has increased capital expenditure as shown by FY2017 capital expenditure of $576.3 million, with 36% of this capital expenditure being on mobile spectrum purchases in Singapore and Australia.

Capital expenditure is expected to remain at elevated levels for the next few years as TPG continues to invest heavily in its mobile networks.

In April 2017, TPG announced its plans to build its own 4G mobile network in Australia by acquiring two 10MHz lots in the 700MHz band.

TPG plans to invest $600 million over the next three years into its mobile network with a goal of building a mobile network that covers over 80% of the Australian population. It's expected that the mobile network will be complementary to TPG's core broadband business as it allows TPG to effectively bundle together broadband and mobile services. Moreover, TPG is expected to make a significant return on its mobile network by leveraging its broadband subscriber base which currently stands at over 2 million subscribers.

Foolish takeaway

Shareholders should view the final dividend cut positively as TPG is retaining more money within the business to invest into its mobile network in Australia and Singapore. This mobile network is expected to lay a solid foundation for growth and offset the margin declines in its broadband business.

The post Should you buy TPG Telecom Ltd at this share price? appeared first on The Motley Fool Australia.

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