Brambles Limited (BXB) Update

Submitted by Craig Strzelecki on 4 May, 2007 - 19:22

Brambles Limited (BXB) has a Buy 1 Broker Call and a price target of $15.50 per share from market analyst UBS. The analyst has observed a 11% underperformance since 1H result. Brambles has underperformed the Australian All Industrials by 11% since its 1H result in late February. They see this as likely to continue due to a lack of near term catalysts, conclusion of its buyback in 2-3 weeks, and downgrades to A$ EPS from the buyback and currency. They have downgraded our A$ EPS by 2-4%, despite our underlying US$ EBIT going up by 2-3%. They now expect only 5% growth in FY07 EPS, compared to our 10-12%pa medium term expectation. A 5% appreciation in the A$ against the US$ would wipe a further 4% off A$ EPS, but 2% of this would be saved if the Euro and Sterling also appreciated. Capital Management: At the current rate, Brambles will reach its 10% buyback cap in 2-3 weeks, and will have spent US$1.5bn. The company will still have to find a home for US$1bn and pay out 130% of annual earnings in order to keep its gearing up at reasonable levels. But, an announcement in this regard could be some way off. Brambles Limited (BXB) is currently trading on 24x FY08E EPS, which is at a 30% premium to the Industrials average. On more important cashflow metrics, the stock is only trading at a 15-20% premium, which we see as undemanding given the company's strong investment traits.

Brambles Limited is listed on the Australian Stock Exchange (ASX) under stock code BXB. You can view their investor website here. Find out the meaning of the recommendations in this primer. BXB was listed on the ASX on 27 November, 2006. Brambles is a provider of equipment pooling and information management services through its CHEP and Recall businesses. The CEO is Michael Ihlein and the chairman is Donald Robert Argus, AO. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade BXB. Check your charts and good luck with your share trading!