Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi, With indexes like the Baltic Dry Index trading near multi year lows and results for US trucking company JB Hunt, hit by excess capacity in moving containers, can you see a justification for Brambles trading at multi year highs. Is this because slow transportation means inventory sitting around on pallets?
Hi Tony,
Brambles (BXB AU) is the global leader in the pallet rental business operating with a pool of over 300mn wooden pallets, the company is highly penetrated into the FMCG supply chain. As you say BXB has indeed been a top performer over the last 12-months rallying 58% from its April’22 low with the most important question being can it continue.
Last week they delivered a strong 3Q23 update plus they also upgraded FY23 guidance. A few things playing out. There is a shortage of pallets globally which means they can charge more while the cost of new ones has dropped as the price of lumber has fallen. This has driven a return to positive free cash flow. While things will go back to normal as supply chains pick up and pallet availability improves, BXB is in a good position, and on 20x Est FY’23 earnings we are adopting a mildly bullish stance at this point in time.
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