Morningstar - Q2 2020 - 32

Are your international investments missing something?

Top Picks in Australian Healthcare
Name

Economic Moat

Price

Fair Value

Price/FV

API API

None

Blackmores BKL

Morningstar Rating

AUD 0.77

1.60

0.78

QQQQQ

Narrow

AUD 44.65

81.00

0.90

QQQ

CSL CSL

Narrow

AUD 181.58

282.00

1.05

QQQ

Ebos EBO

Narrow

AUD 13.22

20.50

1.05

QQQ

Sigma Healthcare SIG

None

AUD 0.39

0.69

0.93

QQQ

Source: Morningstar Direct; Morningstar analyst estimates. Data as of 03/31/2020.

The companies that will likely prove most resilient
in the short term are those providing lifesaving treatments or products, like CSL CSL:AU
and Fisher & Paykel FPH:AU. CSL primarily
manufactures plasma-derived products for the
treatment of immune deficiency diseases,
and Fisher & Paykel is the largest manufacturer
of hospital ventilators and humidifiers, with
80% global market share.
Fisher & Paykel is the only clear direct beneficiary
from COVID-19, given its hospital respiratory

32

Morningstar Q2 2020

devices business. We were already bullish on the
growth trajectory for its hospital business, and
now we expect upside risk to our forecast revenue
in fiscal 2020 and 2021. This division contributes
60% of revenue, and the vast majority of this
is for single-use masks and other consumables.
However, as of late March, the stock was
overvalued. Based on our current outlook for the
COVID-19 impacts on healthcare companies
and changes in market exchange rates, we made
some recent changes to our fair value estimates

for several companies. For Fisher & Paykel,
we raised our fair value estimate to AUD 17 from
AUD 16.40 on Feb. 23. Even so, the stock
had a 1-star Morningstar Rating, with a price/fair
value ratio of 1.7.
We raised our fair value estimate for CSL to
AUD 282 from AUD 236 on March 19. As of March
31, the stock was rated 3 stars. This may be
an opportune time to gain exposure to this highquality company. We expect CSL's operations
to be largely unscathed by the COVID-19
pandemic. The company's revenue declines after
the global financial crisis can be attributed to
excess supply of plasma in the market leading to
price weakness-approximately 80% of global
plasma donations take place in the United
States, and supply has typically increased when
unemployment goes up because donors are
compensated. However, given social distancing
and possible travel restrictions from neighboring
countries, we do not expect excess plasma
supply in the near term. In addition, there is far
higher demand for plasma products today
than a decade ago, stemming from new products



Morningstar - Q2 2020

Table of Contents for the Digital Edition of Morningstar - Q2 2020

Contents
Morningstar - Q2 2020 - CT1
Morningstar - Q2 2020 - CT2
Morningstar - Q2 2020 - Cover1
Morningstar - Q2 2020 - Cover2
Morningstar - Q2 2020 - 1
Morningstar - Q2 2020 - 2
Morningstar - Q2 2020 - Contents
Morningstar - Q2 2020 - 4
Morningstar - Q2 2020 - 5
Morningstar - Q2 2020 - 6
Morningstar - Q2 2020 - 7
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Morningstar - Q2 2020 - Cover3
Morningstar - Q2 2020 - Cover4
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https://www.nxtbook.com/nxtbooks/morningstar/magazine_2023q2
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https://www.nxtbook.com/nxtbooks/morningstar/magazine_2022q4
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2022q3
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2022q2
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2022q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q4
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https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20151201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20141011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20141201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20131011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20131201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20121011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120405
https://www.nxtbook.com/nxtbooks/morningstar/investorconference2012
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20121201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20111011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20111201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20101011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100809_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100607_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100405_lincoln
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https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008fall
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008summer
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https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007fall
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007summer
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