View On Brambles Little Changed After AGM

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            [0] => ((BXB))
            [1] => ((AIO))
            [2] => ((TOL))
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    [1] => Array
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            [0] => BXB
            [1] => AIO
            [2] => TOL
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This story features BRAMBLES LIMITED.
For more info SHARE ANALYSIS: BXB
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Chris Shaw

For several months logistics group Brambles ((BXB)) has been in the sights of Asciano ((AIO)) and Toll Holdings ((TOL)) but according to management commentary at last week’s AGM the two companies are not offering anything the board has not already considered.

As a result it seems clear the company has little interest in agreeing to a deal with either rumoured suitor, though Deutsche Bank suggests Brambles will remain a takeover target thanks to the high cash flow its operations generate.

There were few surprises in the group’s trading update, Credit Suisse noting there continues to be strong growth in the CHEP US operations though the European division was a little disappointing given recent volume growth and pricing adjustments made by the company.

Merrill Lynch was somewhat more positive on the European CHEP update as the broker focussed on the fact the division generated growth in both profits and revenue for the year to date.

Factoring in the positives of a stronger euro and British pound gives some earnings tailwind in the broker’s view, while it sees scope for some upside risk to its forecasts from higher margins in the US operations.

The broker also suggests the company may consider acquisitions in the US market, particularly in the beverage sector where it has a market share of less than 20%. Currently the broker is forecasting EPS (earnings per share) in US dollars of 47c in FY08 and 52c in FY09, which is broadly in line with the estimates of Credit Suisse.

Citi argues there is something of a value gap in the stock at present given recent share price weakness and shareholder approval for a 10% buyback, though it sees this as closing quickly. Regardless, the broker has retained its Hold rating on the stock.

Credit Suisse has also retained its Neutral view, though it points out the buyback should be slightly accretive to forecasts at prices below $13.85 per share. JP Morgan doesn’t see it as accretive for earnings, but does estimate it will reduce the company’s cost of capital going forward.

Overall the FNArena database shows no changes to recommendations on the stock as Brambles continues to score two Buys and one Accumulate rating along with six Hold recommendations.

The average share price target has fallen to $13.58 from $13.92, thanks mainly to Deutsche Bank lowering its target to $12.95 from $14.00 on the back of currency related changes to its forecasts. This compares to a median price target according to Thomson One Analytics of $14.07, while it shows median EPS estimates of 45c and 51c respectively in FY08 and FY09.

Shares in Brambles today are slightly stronger and as at 12.30pm were up 8c at $12.48.

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