BIL brambles industries limited


  1. 401 Posts.
    I am hearing some good news..........hopefully bodes well for tomorrow!

    They have stated that they are tracking as expected so no profit downgrade........will update further as i get the news!!!!

    I am loaded to the hills.....

    Some info for the followers:

    *Remember the replacement value just of CHEP's Pallet pool is just shy of A$7bn in FY03, not to mention crates, systems, depots - oh yeah and two other 'small businesses' worth another 35% of EBITA Cleanaway and Recall.

    *We believe Brambles with provide a 'trading update' to the market, pre next week's US/UK investor roadshow.

    *This release is also expected to provide an indication of the Group's current trading performance to the end of May 2002.

    *The company has decided to do this to 1) keep the market fully informed and 2) to enable more candid information to be provided at the presentations.

    *The CHEP day starts in Orlando on Friday 21 June, with senior management of Recall and Cleanaway presenting in London on Monday 24 June 2002.

    *We expect the key things to come from the meetings / presentations will be:
    1) the market meeting and accessing the quality and confidence of the group's senior managers (most of whom the market has NEVER met)
    2) hearing first hand from the operational managers how CHEP Americas IS performing (from a CHEP perspective rather than the numerous and less balanced 'competitor' or ex employee views).
    3) 'touchy feely' stuff on the overall outlook for each of the businesses
    4) some detailed operational information regarding:
    a) where they operate
    b) market size and penetration
    c) growth opportunities, new contract potential etc
    d) overall divisional outlook

    *The stock has fallen from a recent high of $10.30 p/s a couple of months ago, back below $9 p/s on concerns that the trading update will be negative - we believe this is highly understandable but also highly speculative.

    *We believe the trading performance of the group has been quite robust over the last couple of months.

    *We also believe Brambles is highly unlikely to want to assemble over 50 of the world's buy and sell side analysts and present a negative story.

    *We believe the investor tour will be an important turning point for the stock.

    *THAT SAID - any disappointments at all and the stock will come under further pressure.

    *At sub $9 p/s though, we believe the market has already priced in a downgrade - hence if this outlook is more on the positive side (as we expect) the risk reward of buying now is significant. We believe interested parties should use the current price weakness and BUY before the update and the roadshow.

    *While concerns over the negative impact of a rising A$ on the reported earnings of Brambles are justified - its important to remember that the impact of the A$ will not be reflected in the UK GAAP numbers - some believe the UK market is the marginal pricer of the stock - if you take that view - the higher A$/EUR and A$/GBP will NOT flow into the UK accounts. Eitherway, the company now provides constant currency numbers anyway.

    *We also believe that Brambles is in the final stages of off-loading Brambles Shipping for $80-100m - potentially to Toll or Toll/Patrick. Shipping currently generates around $20m EBIT a year and would mark Brambles final exit of all its Marine assets - further divestments (potentially including Interake, Meineke and Short Bros are also possible in the next 12 months).

    We believe:
    1) the trading update is not going to be as negative as expected - the profit warning and writeoffs were done at the interim
    2) the group is on track to grow core EPS by 15% in FY03
    3) that the commentary at the FY02 result in August will be positive and highlight that 'significant growth' is expected in FY03
    4) that the November AGM should indicate that trading for the first 3 months of FY03 is up 15-20% on FY02 pcp.
    5) that CHEP is making significant progress in both the US and Europe to lift pallets turns, EBITA margins and ROCE.
    6) Chow (CEO) and Turner (CFO) will be extremely well rewarded financially if they deliver 15%+ EPS growth in FY03 and FY04 - and are very motivated to do it!


watchlist Created with Sketch. Add BIL (ASX) to my watchlist

Currently unlisted public company.

arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.