Is it possible that the Brickworks Limited (ASX: BKW) share price could rise to $30 by Christmas as an early present for investors?
One broker has had their say on where it expects Brickworks shares to go.
Citi, one of the brokers in Australia, has a price target on Brickworks of $30, rating it as a buy. That suggests the broker thinks that the Brickworks share price is going to rise around 25% over the next 12 months. A price target is for the next year, not just the next couple of months.
But it certainly suggests that the broker feels Brickworks shares could start heading towards $30 in the coming months.
The FY21 result was better than what Citi was expecting, predominately thanks to the strength of the performance of Brickworks' assets.
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FY21 report
The last financial year saw group revenue fall 6% to $890 million. However, the underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased 61% to $453 million, whilst underlying profit jumped 95% to $285 million.
As Citi alluded to, the property division generated a record earnings before interest and tax (EBIT) of $253 million, an increase of 95% year on year. All of the property trust assets were revalued during the year and this resulted in a revaluation profit of $149 million. On top of that, the net trust income increased by 3% to $31 million.
It has a 50% stake in a property trust along with Goodman Group (ASX: GMG). This trust is one of the elements that can help the Brickworks share price over time.
Brickworks said that it has seen unprecedented demand for its industrial property facilities. The "rapid" growth of online shopping has seen an increased importance of well-located distribution hubs and sophisticated supply chain solutions. There were a number of "significant" industrial property transactions in western Sydney over the past six months.
The value of leased assets held within the property trust was $2 billion at the end of the year. It also has another $686 million in land and infrastructure that is currently under development. This increased "significantly" over FY21 due to development works at both Oakdale East and Oakdale West.
Including the development land, the total value of assets within the property trust was $2.7 billion at the end of the financial year. After including borrowings of $845 million, the total net asset value is over $1.8 billion. Brickworks' 50% share of the net asset value (NAV) was $911 million, up by $184 million during the year.
What does Citi think the Brickworks share price valuation is?
Citi does think Brickworks is a buy. It currently believes that the Brickworks share price is valued at 15x FY22's estimated earnings and 19x FY23's estimated earnings.
However, a couple of weeks ago, Brickworks gave an investor presentation. It said that it had an inferred asset backing of $32.01 per share thanks to its property assets, building products assets and the Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares that it owns.
Some brokers aren't so confident about the next 12 months as Citi. Morgans has a hold rating on the business, with a price target of $25.72.
