Brambles Limited

BXB Details

Brambles Limited (ASX: BXB) is one of the most sustainable logistics businesses globally.

Result Performance (FY21 Ended 30 June 2021)

• The company has recorded a growth of 7% YoY (at constant currency) in its sales revenue from continuing operations to US$5,209.8 million in FY21 supported by volume and price realisation in the global pallets business and the benefit of a progressive recovery in the automotive business.
• It reported 8% growth in its underlying profit (at constant currency) driven by contributions from pricing, surcharges, supply chain efficiencies as well as one-off net income of US$10 Mn in the Asia-Pacific region.
• Underlying EPS increased by 15% to 37.8 US cents due to the benefit of higher earnings as well as the advantage of 1.8 US cents (or 5pts) from the share buy-back programme.

Key Data (Source: Company Reports)

Q1FY22 Update:

• The company’s sales revenue from continuing operations was up by 9% at constant FX to US$1,292.1 million for the first three months of the financial year ending 30 June 2022 (FY22).

Outlook:

Sales revenue growth is expected to be between 5-7% with expected moderation from 9% growth in the first quarter due to stronger FY21 revenue comparatives for the balance of FY22. Underlying Profit growth is expected to be between 1-2%, including approximately US$50 million of short-term transformation costs. Excluding these short-term transformation costs, Underlying Profit growth is expected to be between 6-7%. Dividends are expected to be in line with its policy to pay out between 45-60% of Underlying Profit after finance costs and tax in US dollar terms.

Share Buy Back Program

The company, on its investor day briefing on 13^th September, stated that share buy-back is expected to be completed in FY 2022.  

Key Risks

The company’s operations are exposed to the risks of economic uncertainty arising from the Covid-19 pandemic. It operates in competitive markets. Higher competitive intensity could affect its market penetration and financial performance.

Valuation Methodology: EV/EBITDA Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock is trading towards the 52-week lower levels. Therefore, it can be said that the current juncture is offering decent opportunity for accumulation. The stock price of the company declined by ~3.77% in 9 months. It has made a 52-week low and high of $9.54 and $12.700, respectively.

The stock has been valued using an EV/EBITDA multiple based relative valuation (on an illustrative basis) and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to peer average EV/EBITDA multiple (NTM basis) considering decent outlook as well as higher sales revenue in FY 2021 on the YoY basis.

Considering the aforementioned factors, we give a “Buy” recommendation on the stock at the current market price of A$10.185 per share (Time: 12:48 PM, (GMT +10), Sydney, Australia) on 27^th October 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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