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Brambles Ltd (ASX: BXB) is an Australian supply chain logistics company that specialises in the pooling of unit-loading equipment, specifically pallets, crates and containers. They operate globally through the CHEP and IFCO brands. Brambles’ share price is up 5% in the past 4 days, continuing the strong growth for the stock that has seen a 16% increase this year alone, which proves particularly exceptional when compared to the sector average of approximately –6%. However, this comes as somewhat of a surprise given they are less than stellar FY19 results which consisted of an $85 million decrease in net cash inflow from operating activities, a 91% increase in net cash outflows from financing activities, resulting in an 18% decrease in net profit.
A primary reason for the most recent bullish behaviour of Brambles Ltd’s share price is that the stock’s ex-dividend date is 14 October. It is common to observe growth in stock in the days leading up to the ex-dividend date because investors are likely purchasing the stock to take advantage of its dividend, which in Brambles’ case yields $0.17 per share. Moreover, the fact that Brambles institutional ownership encompasses 45% of the company insists on stock credibility amongst professional investors. Another variable to be considered amongst potential investors is Brambles’ client base. Brambles Ltd primarily serves defensive growth sectors such as the grocery, fresh produce and beverage sectors. Consequently, unfavourable macroeconomic conditions are not expected to have a significant impact on the company’s revenue.
Given Brambles is able to overcome their recent unfavourable cash flow issues; it is likely that their stock will continue to rise, as has been the case for the majority of 2019. With most recent quarterly financials indicating a 5% growth in revenue (the key driver of which was their U.S. business with 7%), Brambles appears to be accomplishing their FY20 objective of “mid-single-digit revenue growth”.
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This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
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