Founded: 1946, ASX code: BLD, homepage: www.boral.com.au
Overview:
Boral Limited is the biggest supplier of building and construction materials in Australia. It has also long time established market presence in both US and Asia. The company generates majority its sales through four groups: Construction materials Australia (responsible for about 50% of all sales), Building products Australia (about 25%), USA division (about 15%) and ASIA division (about 4%).
Analysis of latest annual report (June 2006):
- Market Cap: Depending on the daily stock price the market cap of this company is about $5,500mil in about 589mil of outstanding shares.
- Shareholders Equity: $2,753mil making the stock’s book value approx. $4.67 per share (10.5% growth on year ending June 2005). From that about $537.6mil. ($0.91 per share) is available working capital.
- Earnings per share: $0.61 making the average EPS growth in last 3 years about 8.5%
- Return on Equity: 13.1%, averaging around 14.7% in last 3 years
- Balance Sheet: Working capital of $537.6mil versus total debt of $1,654.4mil
Sharemarket’s view:
Average BLD’s Price to Earnings ratio of 10 suggests the share price around $6.1 ($0.61 EPS x 10 P/E).
GROWTH STOCK:
- Conservative forecast of average EPS growth in next 10 years: 12%
- Share price in 10 years time: about $19 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)
- Total shareholders return in 10 years times: $25 (share price of $19 plus $6 of all the dividends if current payout ratio of 50% persists)
- Rate of Return in next 10 years based on the January 2007 price of $8.20 per share: 11.9%pa
PROS AND CONS:
+++ Long established business, major player in its industry
+++ Good balance sheet for company of its size
+++ Good Returns on Equity
— Issuing new shares and hence decreasing the value of existing ones
— Exposure to a volatile building and materials market
Further information about Australian Stock Exchange www.asx.com.au
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