BXB

Brambles (BXB) have a Buy 1 share trading recommendation and a price target of $15.50 per share from analyst UBS. The analyst have observed the following from the latest trading news: While Brambles reported a healthy 16% rise in EPS, additional costs in CHEP Europe caused profit before special items of US$298m to fall 4% short of our forecast. Topline growth was broadly in line with expectations, apart from some retailing softness in the US. The analysts are slightly lowering our forecasts by 3-5% over the next three years to defer the timing of our CHEP Europe margin growth, partly offset by higher CHEP Americas forecasts. They now forecast FY10 EBITA margins of 30% in the Americas and 26% in Europe. Despite sustaining some damage to sentiment, Brambles still looks attractive to us on a market EBITDA multiple and free cash multiple given the visible drivers of cashflow growth and the potential for capital management. Their valuation drops slightly to A$14.60 (from A$14.80) due to their earnings changes. Their new price target is A$15.50 (was A$15.70) based on a 12-month forward dated DCF. The share analysts' valuation places Brambles at a 15% premium to the All Industrials average OpFCF multiple.

Brambles (BXB) have Macquarie Research Equities (MRE) on their side: they maintain that BXB remains their top pick in the transport sector. According to the analyst, Brambles is trading on an FY08 EV/EBITDA multiple of 9.9x. This represents only a modest premium to the ASX100 all industrials index (ex financials, Resources, MAP and MIG) of 8.9x given Brambles’ superior industry positioning and global scale. At MRE’s stretch valuation of about US$15.50 per share, Brambles provides over 20 percent of upside. The share price will be supported by the on-market share buyback currently being undertaken with potentially over US$1.2bn of shares to be bought (Brambles had originally announced a capital return of up to US$2.2bn of which US$926m was subscribed, leaving about US$1.3bn. Thus far, Brambles has only purchased ~US$72m of stock at an average price of A$12.81ps onmarket).