ALAN KOHLER, PRESENTER: It was another intriguing week in the transport and logistics game.
While two major players, Toll and Brambles, announcing big increases in profit, the real interest lay in what were the Toll and its recently spun off port and rail business, now called Asciano, up to, buying strategic stakes in the much larger Brambles.
To get his take on this I spoke to one of the most astute observers of the sector, JP Morgan's Matt Crowe.
(To Matt Crowe) Well Matt, when Asciano and Toll were split up, Asciano was supposed to be infrastructure, Toll logistics, and now they are both going after Brambles, so the question is, is the chep business an infrastructure business that suits Asciano or a logistics business that suits Toll?
MATT CROWE, ANALYST, JP MORGAN: Well Brambles is a Chep pallets, not really infrastructure, but then a lot of what Asciano owns isn't really infrastructure either so they might argue that it would fit in reasonably well into Asciano but most of Chep's customers are supermarkets or the businesses that supply them and there is a good overlap with Toll's customer base as well and you can see why they might be interested in getting together.
ALAN KOHLER: Do you think there's any chance of an auction between Asciano and Toll for Brambles?
MATT CROWE: Look at this stage I still think it looks a bit unlikely. When you look at the sheer size of Brambles, it's over $20 billion or it would cost in excess of that. Asciano and Toll put together are not that large so it's a bit unclear how they're going to go about it. Right now Asciano has over four per cent of Brambles, Toll has much less but they may be competing against each other to some extent.
ALAN KOHLER: Don't you think that Mark Rowsthorn and Paul Little when they were both at Toll would have been talking about Brambles over the years?
MATT CROWE: Certainly, Paul Little revealed this week that they had been interested in and had been looking at Brambles before Toll and Asciano split, so anything that Paul Little thinks about Brambles, well I'm sure Mark Rowsthorn would know about that, that might even be one of the reasons that they're both moving at the same time.
ALAN KOHLER: Sounds like you think that if there was a contest between them Toll would win?
MATT CROWE: Well it would be I think more sensible from Toll's point of view, firstly they're a bigger company but secondly there is this customer overlap in the supermarkets businesses. You can imagine if you were Toll and you were trying to break into the Asian market, well, having... or possibly down the years, the American market, having a business that already has a very strong position in most of the major supermarkets and retailers and consumer manufacturers would be very helpful in winning business in those markets.
ALAN KOHLER: So how much do you think whoever wins Brambles will have to pay to do it?
MATT CROWE: I think they'd need to pay possibly up to $18 a share, Brambles is a company that has some very dedicated shareholders and they believe it's a very high quality business model and one that is very difficult to replicate and they're not going to part with their shares cheaply, just because the stock has in recent months been a bit depressed in terms of the share price.
ALAN KOHLER: In relation to Toll's results, you remarked this week that Asia and New Zealand, the acquisitions there aren't really developing that well, which is ironic when you consider that the thing they picked up, that they didn't really want, Virgin Blue, is going gangbusters?
MATT CROWE: Yeah that's right and the Toll result was a good one, their domestic business did very well, Virgin Blue's doing very well the only thing we were a bit concerned by was the overseas acquisitions, that's New Zealand and Asia, are not doing particularly well. New Zealand's been very weak for a while mostly because of the economic conditions and Asia has yet to hit it's straps, now it's probably a little bit too early to judge it either way but if you were looking for evidence that Toll's successful domestic acquisition driven model can be replicated overseas, we haven't really seen any of that yet.
ALAN KOHLER: So finally buy, sell or hold on the three companies, Asciano, Toll and Brambles?
MATT CROWE: We've got buys on both Toll and Brambles and a hold on Asciano, until recently we thought it was a bit over valued now it's come back to where it's reasonable value but it's a neutral recommendation at this stage.
ALAN KOHLER: Thanks for joining us Matt.
MATT CROWE: Thank you.
BXB Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)