Brickworks: Long-term value, short-term headwinds

About the author:

Liam Schofield
Author name:
By Liam Schofield
Job title:
Analyst
Date posted:
22 November 2023, 7:00 AM
Sectors Covered:
Industrials

  • Brickworks (ASX:BKW) has released a trading update ahead of today’s AGM. Whilst the company reported Q1FY24 Building Product EBIT ahead of the pcp, management continues to flag a softening outlook and an intention to undertake maintenance work to manage stock levels. The company also reported that property net asset values are likely to decline c.10% in HY24, as cap rates increase c.110 bps.
  • BKW’s outlook commentary is arguably the weakest amongst the building product peer set, with lower earnings likely to be realised over the coming 12 to 24 months. The forecast property cap rate change (Dec-23: c.5.2%) is more likely a catch up with current market pricing.
  • Whilst we acknowledge the BKW share price remains at a discount to the inferred NAV, the earnings headwinds (relative to consensus) leave us on a hold recommendation and price target of (login to view). We would likely need a price closer to $20/sh to be an add at this point, with our preferred building products exposure being CSR.

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