Boral Limited (ASX: BLD)

Identified significant potential development and divestment opportunities: Boral Limited delivered strong results in Australia and is one of the key suppliers to the Australia’s booming infrastructure and has a strong residential and non-residential construction markets. Boral Limited agreed to sell its Concrete & Quarries business Denver, Colorado to Brannan Sand and Gravel Company, LLC for US$127 million. This consideration price represented a trailing 12-month EV/EBITDA multiple of around 8 to 9 times. The Group expects to recognise a pre-tax profit on sale of around US$45 million but will be subject to few adjustments on the completion of the transaction and will be reported as a significant item in FY2018. The proceeds will be used in repayment of its debts subsequently.


Cost Improvement Areas for FY18 (Source: Company Reports)

Colorado construction materials business has performed well, and these were the only concrete and quarry operations that Boral owns in the USA. Boral focuses on expanding its footprints in USA by growing its building products, and the group realised that it was the right time for divesting its business Colorado after taking the advantages of the synergies from the Headwaters acquisition. It is expected that the transaction will be completed on or around 31 May 2018. It has been delivering transformational growth in North America, however, lately there was some concern on the performance of the business. The stock has been falling since the start of the year and was down by 19.23 per cent and slipped by 16.87 per cent in the last one month. BLD witnessed a recovery of 1.27 per cent as on 22 May 2018. The stock is already trading around its 52-week low price. We would recommend to “Buy” the stock at the current market price of $6.34.
 

James Hardie Industries Plc (ASX: JHX)

An increase in General Corporate Cost: The Group announced its results for the fourth quarter ending on 31 March 2018.  The Group reported a Group Adjusted net operating profit of US$81.1 million for the quarter and US$291.3 million for the full year which was an increase of 49 per cent and 17 per cent, respectively as compared to the same period in the prior year.Its North America Fibre Cement Segment performed well for the quarter and delivered a growth of 6 per cent for the full year which was driven by higher net prices. The Group started maintaining a momentum in the second half and performed in line with the market index and according to the Board’s expectations. James Hardie made a significant strategic acquisition of Fermacell, which enabled the Company for meaningful long-term growth in Europe. For the quarter, General Corporate SG&A expenses increased by US$2.9 million, primarily due to higher stock compensation expenses.


Trend in General Corporate Costs (Source: Company Reports)

In the recent Valuation Report, it was observed that a 5 per cent of increase in mesothelioma claims in 2017-18 was reported as compared to the claims reported in 2016-17. On the other hand, a 6 per cent of decrease in non-mesothelioma claims was reported as compared to 2016/17 claims. Average claims awards in 2017/18 have been lower than expectations across all disease types with the exception of workers compensation. The Group expects its North America Fibre Cement segment EBIT margin to be in the top end of its stated target range of 20-25 per cent for fiscal year 2019. The stock was up by 11.53 per cent in one year, followed by a drop of 2.98 per cent in last three months. The stock slipped by 5.07 per cent in last five days but just after the release of results, the stock experienced a recovery of 4 per cent on 22 May 2018. However, the stock looks “Expensive” at the current price of $23.35.

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