Portfolio Changes - Reduce CSL, Increase ORI & AUB

Recent changes to Blended Australian Equities Portfolio

Reduce CSL Limited (CSL)

• We have reduced our weighting in CSL due to the ongoing threat of the Trump administration implementing an Executive Order on ‘Most Favored Nation’ (MFN) pricing to reduce prescription drug and pharmaceutical prices.

  
  

• The MFN model is aimed to lower U.S. drug prices by benchmarking them against price charged by manufacturers in other developed nations. Under Trump’s first administration, the review excluded immunoglobulin (IG) and vaccines. However, under the new Executive Order (EO), the Department of Health and Human Services is expected to set price targets for pharmaceutical manufacturers within 30 days. These lower prices would apply across Medicare, Medicaid, and commercial markets - a wider net than policies of Trump’s first term. We expect the uncertainty and lack of detail surrounding the new EO will weigh on the pharmaceutical sector, including CSL.

  
  

• The U.S. remains CSL’s largest market for both IG and vaccines. Frustratingly, the policy uncertainty is occurring at a time when the underlying drivers of growth in plasma-derived products remain robust. Moreover, the U.S. administration’s belligerence toward vaccines stands in contrast to the country experiencing one of its worst Flu seasons in twenty years. The renewed focus CSL has on improving margins and returns on capital is showing clear signs of progress but is offset by headwinds of tariff policy uncertainty.

Add AUB Group (AUB)

• AUB upgraded its FY25 earnings guidance toward the top end of its outlook range of A$190-$200m, representing 11-17% growth over FY24. The improved trading momentum for AUB is supported by continued favorable premium rate increases, which are driving profit commission margins. AUB also noted a ~9% increase in average commission and fee income per client across Australia and New Zealand.

  
  

• Earnings growth is being further supported by continued favourable industry conditions and EPS-accretive acquisitions.

Add Orica Limited (ORI)

• We added to Orica (ORI) following its strong 1H25 result, which came in 9% above consensus Earnings Per Share estimates. The result highlighted improved pricing and mix in ORI’s core Blasting Solutions business.

  
  

• Strong cash generation led to a 29% uplift in net operating cash flow, supporting a 32% increase in the 1H25 dividend.

  
  

• ORI’s three-year, +10% EPS growth profile is underpinned by solid ongoing demand from mining and civil infrastructure projects, alongside an active capital management program, including on-market share buybacks.