BXB - Brambles Industries

[ozambersand]

Ken, those figures ($14 target price) have been around since June as summed up at FNArena. But for some reason they never got much publicity:

22-Jun-07 - Merrill Lynch rated BRAMB LTD FPO as 1 - Buy, Medium Risk
Analysts acknowledge the 11 month trading update can be labelled "slightly disappointing", but they also believe investors over-reacted to the release. They have thus retained their Buy recommendation with a slightly lowered price target: $14.70 instead of the $15 prior. Earnings forecasts in AUD have been lowered due to the impact of a stronger Aussie. -
Target price set was $14.70
22-Jun-07 - ABN Amro rated BRAMB LTD FPO as 3 - Hold
Broker sees the trading update as largely in line, even though some investors may have been disappointed by CHEP UK. As the upcoming FY07 result is unlikely to surprise in a positive manner and with no other catalysts in sight, the broker has decided that a Neutral rating is probably best suited for the stock at this point in time. -
Target price set was $14.05
22-Jun-07 - UBS rated BRAMB LTD FPO as 3 - Downgrade to Neutral 1 from Buy 1
A disappointing update showed the US and Europe not accelerating for CHEP and overall growth stuck at 6%. Not great for a company trading at 24x, as far as the broker is concerned. Earnings reduced by 7% in FY08. Target falls from $15.50 to $13.60. Downgrade. -
Target price set was $13.60
22-Jun-07 - Credit Suisse rated BRAMB LTD FPO as 1 - Upgrade to Outperform from Neutral
Target $14.45 (was $15.06). In the broker's view the company's trading update suggests there is downside risk to its and the market's forecasts for CHEP Europe, though overall the business remains good quality with growth potential. Given a lack of catalysts the broker expects the stock will do little in the short-term, but recent relative share price weakness justifies an upgrade in rating. -
Target price set was $14.45
22-Jun-07 - Deutsche Bank rated BRAMB LTD FPO as 1 - Buy
Deutsche Bank's report on Brambles is probably best summarised as "Beauty is in the eye of the beholder". Analysts acknowledge there's plenty of room for why investors would have been unhappy with the latest trading update, but there's so much value to be had at current share price levels... As they've only sliced off 1% of their CHEP Europe forecasts, the analysts believe the buy thesis for this stock remains intact. -
Target price set was $15.00
22-Jun-07 - Aspect Huntley rated BRAMB LTD FPO as 2 - Accumulate
Update database. -
19-Jun-07 - Citi rated BRAMB LTD FPO as 1 - Buy, Medium Risk
The broker suggests recent weakness has been the result of currency movements and higher bond yields, as well as declining buyback volumes. Despite this the broker retains its positive view, suggesting an update on proposed capital management initiatives in August could act as a catalyst for the stock. -
Last Checked Price: Target price set was $15.30

OK From the announcements on the ASX, it looks like the brokers/banks involved were Citigroup (Toll) and Macquarie (Asciano)

My broker put the poor performance of the share price recently down to the rising Aussie dollar. However, Brambles always quotes in "constant currency".

Back in June I asked them:

1): Given that the latest report quotes a slightly less than 2% figure (also constant currency) how much of this difference relates to a variance in the dollar vs Euro ie what was the profit growth in terms of US dollars USm$669.8 - ?????.

Their reply: Please note that stating of figures in constant currency eliminates the impact of currency movements. That is why we provide this figure so that you are looking at underlying growth in the business and not currency movements.

The recent news articles are related to Michael Ihlein's comments about future plans for the company (nothing really new) and the "outing" of the major holders.

I was also surprised that their long term buy-back stopped suddenly on the 20th June. Perhaps while this was happening it was propping up the price artificially as whenever the price fell to the mid $12's they'd buy a few million and it would go back above $13. (I was doing nicely buying and selling while this was happening for a while!)

As soon as that stopped, it became a free-for-all (and a free-fall!)

Now I just wish I'd bought more when it was down so low for so long!

Nick, great picking and technical analysis! I note that you have identified 20th August as a keydate for a seasonal downturn. The 22nd August is their annual reporting date. Fundamentally (as opposed to techinically) there might be a reason for a downturn as people push the share price up in expectation of this report then selling out just before because they have gained their speculative profit and don't want to be a part of any disappointment/negativity afterwards???

 

[Awesomandy]

Why did the stock price dive so much. Was it "helped".

If this is true, then look out for the other cashed up companies that suffered similar fates recently after reporting increased profits only to see their share prices take a dive. (Caltex and Metcash etc) Maybe they will report new major shareholders in the coming weeks also.

I'm not sure if MTS can be placed in the same category. Some institutions have openly told the market that they are selling/have sold MTS. I have now pretty much digested their annual report, and, I have to admit, I'm considering doing the same thing. Of course, this discussion is for another thread...

Back to BXB... The growth was quite disappointing when compared to the expected numbers, but it is still double-digit. Of course, it does get punished, especially when the P/E is quite high - around 25 (don't have the numbers in front of me right now).

However, personally, I think it is a pretty good cash cow for the long/very long term. It generates a decent amount of cash, has low debt, and has good growth potential. Currently, the market is expecting and looking for shooting stars. However, when the economy hits a speed hump, and with credit more expensive and harder to come by, I believe the "cash cow" companies such as BXB would be likely to outperform other stocks as investors look for companies will less debt to service, and has the ability to generate cash to get through the tougher times. I am also lucky enough to learn a little bit about the BXB business myself outside from the annual reports, and I'm quite confident that this stock is of good long term value - hence why I bought them in the first place.

Although, in the short term, I would agree with the previous posts regarding the sideways/downward movements. As mentioned, there is a pretty strong resistance at $13, and there is also a gap to be filled at around $11.50. But then, if you are in just for the short term, I'm not sure why you would still hold a bluechip stock that has gone up 12% in a day.

 

[goldensun76]

Well, it depends on if BXB can break through $13 or not. If it can plus the possible buy back later this year I think it will be a matter of time before it reach back to $14.
I wish I did get more when the price drop down to $10.85

 

[Awesomandy]

Well, it depends on if BXB can break through $13 or not. If it can plus the possible buy back later this year I think it will be a matter of time before it reach back to $14.
I wish I did get more when the price drop down to $10.85

It looks like we might have to wait another day for that. The intraday high was 13.05, but it retraced from that pretty quickly, back down to around 12.80. It closed at 12.97 with a flurry of activity just before close. This suggests to me that the resistance is here to stay (for now, at least). And with the overseas market tanking as we speak, we may have another buying opportunity coming soon.

 

[goldensun76]

Well, looks like Asciano Group just took another piece in the stock. With the Fed cutting the rate, there should be a chance for the stock to break $13...... I read in the AFR some people is thinking if a takeover of the stock comes, it will be in the $15 range...... Any thought??

 

[Sean K]

Did Asciano start cutting it's stake in about November.

They must be looking at it again.

Another 'blue chip' to investigate once the dust settles, or get the fingers a bit dirty with.

 

[Muschu]

Hi
Any current thoughts amng the experienced out there in the cosmos as to where BXB are presntly situated on the buy - hold - sell spectrum?
Opinions / discussion would be welcome.
Thanks
Rick

 

[Bill M]

Muschu, I don't have an opinion either way but this story may be of interest to you.

"Brambles Limited (BXB) has responded to a fall in its share price, saying there had been a dramatic over-reaction to news that major US customer Wal-Mart was reviewing its pallet arrangements. Brambles shares fell more than 17% in morning trading due to uncertainty about the financial impact of the announcement on the company."

Full story here

 

[Muschu]

Muschu, I don't have an opinion either way but this story may be of interest to you.

"Brambles Limited (BXB) has responded to a fall in its share price, saying there had been a dramatic over-reaction to news that major US customer Wal-Mart was reviewing its pallet arrangements. Brambles shares fell more than 17% in morning trading due to uncertainty about the financial impact of the announcement on the company."

Full story here

Thanks for this Bill. I did see this story and the consequent company announcement that the SP fall was an over-reaction --- followed by a lift in SP back to $9. This is still significantly less than the SP has been for a long time.
I'm an amateur. On the TOL discussion one comment was along the lines of not buying on a down-trend but rather waiting until it was thought a bottom had been established.
I'm surprised BXB has not drawn more comment these past few days. I wonder whether any of the chartists or more experienced analysts out there in ASF-Land would like to offer an opinion on where BXB is situated right now.
R

 

[reece55]

Thanks for this Bill. I did see this story and the consequent company announcement that the SP fall was an over-reaction --- followed by a lift in SP back to $9. This is still significantly less than the SP has been for a long time.
I'm an amateur. On the TOL discussion one comment was along the lines of not buying on a down-trend but rather waiting until it was thought a bottom had been established.
I'm surprised BXB has not drawn more comment these past few days. I wonder whether any of the chartists or more experienced analysts out there in ASF-Land would like to offer an opinion on where BXB is situated right now.
R

From a fundamental perspective, Brambles is an expensive industrial when other companies have been hammered. Based on EPS growth of about 10%, Brambles is trading at some 17 times earnings. They are great managers of capital and have achieved strong returns of late, but palette management is about base line with economic activity as you can get. Plus, as we have seen now, they have exposure to the US and indeed their earnings are exposed quite heavily to the US$.

Technicals - broke support of about 9.20 ish, but the high volume doji shows indecision - clearly, people have mixed views. Personally, technically and fundamentally I would be staying away, but it's just my .

One thing I will say is that next to JB HiFi, these guys report their financial metrics better than anyone on the ASX - great stuff in their financial reports, their accounting staff are top notch!

Cheers

 

[Muschu]

From a fundamental perspective, Brambles is an expensive industrial when other companies have been hammered. Based on EPS growth of about 10%, Brambles is trading at some 17 times earnings. They are great managers of capital and have achieved strong returns of late, but palette management is about base line with economic activity as you can get. Plus, as we have seen now, they have exposure to the US and indeed their earnings are exposed quite heavily to the US$.

Technicals - broke support of about 9.20 ish, but the high volume doji shows indecision - clearly, people have mixed views. Personally, technically and fundamentally I would be staying away, but it's just my .

One thing I will say is that next to JB HiFi, these guys report their financial metrics better than anyone on the ASX - great stuff in their financial reports, their accounting staff are top notch!


Cheers

Many thanks Reece for this comprehensive and informed comment. Very much appreciated. I'd be interested to know your opinion of TOL on its thread.
Regards
R

 

[cutz]

G'Day,

I've been watching Brambles all arvo and i was wondering if an experienced techie could check it out and explain why it won't poke above 6.92, is what i'm witnessing a programmed distribution at 6.92 ?

 

[skc]

Just thought I'd bump this thread a little bit.

Yesterday down 11.7%. Today it held above $5 for most morning, but now well and truely through this at $4.83, down another 14.5%.

They are still paying 17c interim dividend so at some stage the yields should kick in as a support. Anyone catching this falling knife?

For what it's worth, this action is similar to LEI after their recent profit downgrade. The selling pushed the stock down almost 40% (from ~$28 down to $16). It finally stopped on the back of some project wins and the dividend yield at 7.5%.

Disclosure: Not holding, just watching.

 

[ROE]

Just thought I'd bump this thread a little bit.

Yesterday down 11.7%. Today it held above $5 for most morning, but now well and truely through this at $4.83, down another 14.5%.

They are still paying 17c interim dividend so at some stage the yields should kick in as a support. Anyone catching this falling knife?

For what it's worth, this action is similar to LEI after their recent profit downgrade. The selling pushed the stock down almost 40% (from ~$28 down to $16). It finally stopped on the back of some project wins and the dividend yield at 7.5%.

Disclosure: Not holding, just watching.

Market punish them for telling lies or inaccurately project impact... when the whole walmart debacle end they say it wouldn't effect their earning too much then wam down 25%-30%? ....
in this environment better to be upfront and pain a **** picture than pain a rosy picture and under-deliver.

Watch WES farmers next when it report in 6 months from now and Coles and other division better stack up or they are under the same hammer.

 

[voyz]

before i start im majorly new in this game.
does anyone know whats happening wiht bxb or which way it heading? made a majorly bad trade with it on the day it plumeted then it did it again and still i hold at 2700 dolla loss. yesterday was $3500 loss. im hopin for it to get bak to $5 and sell at a 2k loss. to scared to buy more at a low price to work my average down incase it keeps goin further down.
dont flame me.
cheers

sell an start agian? im using leverage.

 

[JTLP]

Voyz...

Mmm....whilst nobody can tell you to buy, hold or sell (gots to be a financial panther (planner ) you should think about the following:

- What was your trading strategy?
- Can you afford to lose the money you invested?
- Do you believe it will go higher or lower (with either T/A or F/A evidence)
- Do you believe in the fundamentals of the company and are you prepared to hold based on what you know?

I'm sure there is a lot of other stuff to think about but that is some of my criteria when it comes to stocks...

Good luck

 

[voyz]

hi

does anyone know why bxb fell 60 cents today wiht no report or nothing.
just curious to know if anyone know what could have caused this fall.??

cheers

 

[skc]

Slump over nothing really... see here.

http://business.smh.com.au/business/brambles-tumbles-over-lost-contract-20090325-9aay.html

The defection to plastic sounds like a one-off account only - I'd be worried if they lose increasingly more contracts.

1% of revenue reduction should not lead to 10% share price fall. Market seemed to overreacted. There could be a bounce back up tomorrow, but who knows?

 

[ROE]

hi

does anyone know why bxb fell 60 cents today wiht no report or nothing.
just curious to know if anyone know what could have caused this fall.??

cheers

No man they lost to a rival and I think this rival can be a big threat for brambles

I have Brambles on my watch list to buy but I no longer want to buy at this price given this threat... this iGPS is a beauty, I did a bit of research, if this was a public company I probably buy that and hedge with Brambles but it is privately own.

I think the fundamentals structure for Brambles has change and it may not be apparent right now give it a few years it could eat into brambles market share and with the Walmart debacles I think Brambles lost their monopoly pallet status... When your customer dictate on their term how they want to use and pay for the pallets, that spell the begin of the end.

it smack brambles in the head for doing nothing all these years except keep doing old wooden pallet for the last 30 years...where is their research into something better, where are they keep an eye on competition and see what they have in store and use their monopoly status to come up with the same or better product while they are developing it.

Remember Yahoo used to be the king of search engine and even have chance to buy Google but no they did nothing then Google becomes a threat too damn late.

 

[ROE]

Slump over nothing really... see here.

http://business.smh.com.au/business/brambles-tumbles-over-lost-contract-20090325-9aay.html

The defection to plastic sounds like a one-off account only - I'd be worried if they lose increasingly more contracts.

1% of revenue reduction should not lead to 10% share price fall. Market seemed to overreacted. There could be a bounce back up tomorrow, but who knows?

I think it's more than 1% in the near future, I think the market do it nice to Brambles today, it going to get smack it harder in next few weeks once they uncover what I already uncover..