We upgrade our recommendation to Buy with a $7.74 price target. Our price target is derived by applying long-term trading multiples to our FY13 forecasts (one year forward earnings at June 2012) and converting at spot currency. We have used a blended average including our DCF valuation, an enterprise value/operating earnings trading multiple of 8.0x across the group and P/E of 16x.
Risks to our share price target include:
• Customer losses to competitors in the US and Europe; • Difficulties integrating the IFCO acquisitions; • An adverse reaction by customers to Brambles strong market share position in US pallets with white wood and pooled assets; and • A slowdown in global economic growth. This could see 1) Weaker pallet volumes; or 2) lower levels of employment which drives demand for document and paper management services.
BXB Price at posting:
$6.62 Sentiment: Hold Disclosure: Held
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