Boral’s Returns Close in On Cost of Capital But Still No Moat; FVE Increased 10% on Analyst Transfer
We increase our fair value estimate of no-moat Boral by 10% to AUD 6.30 per share following a transfer of analyst. Returns on invested capital are now expected to be lower over the coming five years, averaging 7.3% versus our prior forecast of 9.6%. We’ve also trimmed our estimate of Boral’s cost of capital, now assessed at 7.7% and down from our prior estimate of 9.6%. The sale and exit of a number of high fixed-cost, highly cyclical businesses, in particular, the reduction of bricks exposure, ...Boral manufactures and supplies building and construction materials in Australia, the U.S. and Asia. Co.'s segments are: Construction Materials & Cement, consisting of quarries, concrete, asphalt, transport, landfill, property, cement and concrete placing; Building Products, consisting of Australian bricks, roofing and masonry, and timber products; Boral Gypsum Joint Venture, which manufactures and sells plasterboard and associated products; and Boral USA, consisting of bricks, cultured stone, roof tiles, fly ash, concrete and quarries. The primary end use markets for Co.'s products include residential and non-residential construction and the engineering and infrastructure markets.
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