29/02/2024 09:14

Is there any value left in the remaining local building stocks?

We’ve written a couple of times this year about the ASX losing stocks faster than it replaces them with quality IPOs, with the Building Sector epitomising this trend: • CSR looks set to be swallowed up by French giant Saint-Gobain in a $3bn deal. • The Stokes Group has bid to take full control of concrete business Boral (BLD) – it already owns 71.6%. • Cement maker Adbri (ABC) has agreed to a $2.1bn buyout from Irish giant CRH Group.

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19/12/2023 09:20

CSR Ltd (CSR) $6.46

CSR has surged +37% year-to-date, and while we like the business, our concern towards its valuation is rising as it makes new 15-year highs. The company's 1HFY24 result was solid, with weak aluminium and softer-than-expected property earnings offset by an excellent building product result.

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21/09/2023 09:43

CSR Limited (CSR) $5.66

Building material companies are closely linked to the Australian population growth story via their exposure to new home construction in Australia. We believe CSR is well-positioned to benefit from new home construction and increased building product volumes, it's our preference over overseas earners such as James Hardie (JHX), who receive little benefit from domestic population growth. Two weeks ago, we wrote, “We can see CSR testing its post-COVID high into Christmas, but the risk/reward isn’t exciting ~$6.” Clearly, the risk/reward has now improved slightly.

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05/09/2023 09:00

CSR Limited (CSR) $6.08

CSR keeps marching higher but we are conscious that its slowly becoming fully valued considering the position of the construction industry and economy i.e. they are pricing in good news on both fronts. CSR doesn’t report until October hence we have no insight as to whether they are faring as well as James Hardie (JHX).

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21/07/2023 09:10

CSR Limited (CSR) $5.45

CSR has recently agreed to acquire Woven Image for A$43m in a move (albeit small) that further extends CSR's commercial interior offering. It’s a move we like at MM with the attractive multiple explaining CSR's decision to end its buy-back (with ~$64m remaining) and undertake the acquisition.

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07/07/2023 09:27

CSR Ltd (CSR) $5.38

The building stocks have remained firm over recent weeks but we believe they’re becoming fully valued considering the position of the construction industry i.e. the risk/reward is unattractive after their strong 12-month recovery.

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26/05/2023 08:56

CSR Ltd (CSR) $5.35

This month saw CSR deliver its FY23 result which was net pleasing as a positive building products outlook was tempered by disappointing Aluminium guidance. While housing vols will eventually decline (we think from 2H24), we believe this will be less severe than first thought and partially offset by increased property sales. We also note CSR remains net cash, with the $60m buyback providing some flexibility in the near term. • We aren’t attracted by the risk/reward of CSR as its tests the upside of the last few months.

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21/04/2023 09:22

CSR Ltd (CSR) $5.21

CSR has rallied by a similar degree as JHX with the stock currently trading +32% above its early 2023 low as it looks for a domestic housing recovery in the years ahead i.e. with 650,000 people due to move to Australia and a rental crisis already weighing on many people’s lives the government needs the industry to regain its mojo asap.

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04/04/2023 09:28

CSR Ltd (CSR) $4.88

CSR will enjoy a domestic housing revival which we believe will unfold through 2024/5 making this the time to start considering appropriate investments across the sector. • CSR continues to struggle hence we would call it an accumulate into weakness as opposed to an outright buy.

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09/03/2023 09:12

CSR Ltd (CSR) $5.09

Building products business CSR has rallied impressively from its almost 40% sell-off and although it feels rich around $5 when we consider its 11.7x valuation and forecasted 6.8% yield over the next 12 months it’s easy to comprehend why it has been the stock of choice for investors looking to hold some exposure to construction – this is not the stock we would opt for when the sector turns but it is the safer play for those that believe, like Macquarie,  that the downturn has at least another 18 months to play out.

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