The CSR Limited (ASX: CSR) share price is outperforming the market after the building materials supplier cut a $1 billion cancer from its operations.
The company announced it has entered into an agreement to sell its Viridian Glass business to private equity group Crescent Capital Partners for around $155 million.
The news sent the stock jumping 2.4% to a two-week high of $3.03 during lunch time trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is down 0.1%.
Investors are happy to see the rear of the business as Viridian has been a big thorn in shareholders' posterior since it was formed a decade ago through the acquisition of two glass businesses.
Good riddance
Viridian had suffered a number of big write-downs as the business underperformed because it couldn't compete with cheaper glass imports used in windows for commercial and residential properties.
Management is also looking to sell the land leased to Viridian at Ingleburn, New South Wales, and the sale of Viridian and the property should inject more than $215 million into the coffers of the company.
But shareholders shouldn't expect to see any of that in the way of a capital return as CSR will need the cash buffer as the sector grapples with a housing construction slowdown.
The headwinds buffeting the sector has sent CSR's share price careening by 42% over the past six months. That's materially worse than the Boral Limited (ASX: BLD) share price and James Hardie Industries plc (ASX: JHX) share price, which are down 18% and 28%, respectively.
Is CSR's share price cheap?
But that doesn't mean there's more value in CSR's stock. CSR is fully exposed to the domestic market while Boral and James Hardie are significantly leveraged to the US market.
While US housing data has been surprisingly weak recently with sentiment among homebuilders in that country falling off a cliff due to interest rate increases, I don't believe the downturn will last as the US economy is still powering ahead.
Our economy is no shrinking violet but the pace of growth here isn't as strong as the US.
Further, our housing market hasn't had the benefit of a big shakeout like what happened in the US during the GFC and our households are much more indebted than our peers in that country.
For these reasons, I favour investing in Boral and James Hardie over CSR for 2019.
