Brambles – Share Buyback Adds Support

Brambles is under Algo Engine sell conditions and we’ll review the FY19 earnings result with interest when announced on the 21st of August.

Earnings are likely to come in below the “moderate growth” expectations. We think the number will be flat to negative. Downside risks to the share price are underpinned by the share buyback which will recommence, post the earnings result.

Based on FY20 earnings we have BXB trading on a forward yield of 2.5%.



Brambles – Valuation Review

Brambles has announced the sale of its IFCO business to Triton & Luxinva for US$2.51bn. The proceeds will be used to:-

$300m return of cash through a $0.29 special unfranked dividend and up to  $1.65bn on-market buy-back. The balance will go towards reducing debt.

Our key concern with BXB is the recent earnings result showed underlying EPS growth of 2% and with the stock trading 22x earnings, it looks expensive.




BXB 1H19 Result – Algo Sell Signal

Brambles BXB reported 1H19 earnings which showed solid revenue growth but only a modest 2% profit growth.

EBIT from 1H19 continuing operations of US$504m.

We expect FY19 underlying profit growth to show low single digit improvement on the same time last year.

The stock looks slightly expensive at 19x and 3% yield. We’re looking for a pullback to sub $10.50 before reconsidering.

The IFCO separation remains on track for completion this year and will help  underpin the share price.


BXB – Trading Update

Brambles reported 1Q FY19, which guided towards flat 1H EBIT growth.

With the stock trading 16 x earnings and 3% yield, we believe there is only limited upside to the share price in the short-term.

The attractive story here is the upcoming spin-off of the plastic pallet pooling business. We expect this to go to a shareholder vote and be finalized early next year.

Buy BXB and sell covered call options to enhance the yield.