Question 1: What do the analysts say now about CSL? It doesn’t seem to be going anywhere. What do you think?
Answer: CSL does seem to be stuck in a rut. The market likes the stock, but feels it is somewhat expensive and growth has slowed a touch compared to its historical performance. It also has some concerns over the CSL Vifor part of the business. The brokers remain bullish. All the major brokers surveyed by FN Arena have a higher target price than the current ASX price, in a range of $305 to $330. The consensus is $316.73, some 16.2% higher than the last trading price of $272.62. There are 5 “buy” recommendations and “1” neutral recommendation.
I think CSL needs a catalyst to take it out of its current trading range ($250 to $300). This could come from an upgrade to guidance, positive news on new drug/research trial, or improved performance from CSL Vifor.
Question 2: I’m thinking about my super next year. Are there any changes to the super rules in 24/25?
Answer: The Government hasn’t announced any changes yet, other than the legislated increase in the super guarantee levy (the employer’s contribution to super) which increases from 11% to 11.5% on 1/7/24. Due to inflation, it is widely expected that the super contribution caps might be increased – the concessional cap from $27,500 to $30,000, and the non-concessional cap from $110,000 to $120,000. The former governs employer/salary sacrifice contributions, the latter after tax or personal contributions.
If the non-concessional cap is increased to $120,000, then the amount under the “bring-forward”’ rule would increase to $360,000. We should find out in the Budget about any changes.
Question 3: Do you think the recent pullback in the S&P 500 and ASX 200 is now presenting a buying opportunity, or would you wait to see how the Israel/Iran geopolitical situation plays out? I plan to average in investments – how would you play it when you have been cashed up waiting for this opportunity?
Answer: Peter wrote a piece on Monday (see https://switzerreport.com.au/how-will-sticky-inflation-and-the-threat-of-war-affect-stocks/ [1]) that sets out our “big picture” view. We both see the correction lasting a little longer and being bigger, particularly while the Iran/Israel stoush continues. However, the challenge with corrections is trying to find the right time to step in. Other market participants are trying to do exactly the same (find the right time to buy), so my advice is don’t be too greedy and think you will “pick the bottom”. You might want to buy a little and then look to “average down”.
Question 4: Recently I went to one of theme parks in Gold Coast – Seaworld. Very good entertainment but I got shocked that I had to pay over $200 just for myself and my granddaughter, and on how many visitors there were. The carpark was full! I thought it must be a very good business for the owner. So I found that Coast Entertainment Holdings ( formerly named Ardent Leisure) owns it. I had a quick look at the company and they seem to be doing well. Their earning are forecast to grow over 60% this year and they are currently doing a share buyback. Do you think they are a buy?
Answer: Coast Entertainment Holdings (CEH) has had a very chequered history. Formerly Ardent Leisure, before that Leisure World. As Ardent Leisure, it had a big investment in the USA in tenpin bowling sites through Main Event. One continuing asset (since listing in circa 1995) has been Dreamworld on the Gold Coast. In addition to Dreamworld, it also owns WhiteWater World and Skypoint. You mentioned SeaWorld – this is not owned by Coast Entertainment.
Only one major broker covers Coast Entertainment and that is Ord Minnett (via Morningstar). They have a target price of $0.60 (current ASX price of $0.41).
Although they are doing a share buyback and have an impressive landbank that may be available for development, owning theme parks is a tough business due to the vagaries of weather, tourism, and accidents. Not for me.