Brickworks Limited (ASX: BKW) just announced its FY23 half-year result which included ongoing growth for its underlying value and underlying profit. The report revealed that the S&P/ASX 200 Index (ASX: XJO) dividend share could be materially undervalued.
The business reported a number of impressive financial metrics considering the widespread uncertainty over the past year.
It said that total revenue increased by 13% to $584 million, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 25% to $607 million and underlying net profit after tax (NPAT) went up 24% to $410 million.
The Brickworks dividend was increased by the board to 23 cents per share, a rise of 5%.
Building products EBITDA was largely steady, with an uplift in North America offset by a "modest fall" in Australia.
Brickworks reported that properties within the industrial joint venture trust continue to be completed and property values have increased thanks to strong demand and rent potential.
Now I will look at two aspects of the business – is it good value and an effective ASX 200 dividend share?
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Is the Brickworks share price significantly undervalued?
Brickworks is very open about how much the undervalued assets within its business are worth.
The ASX 200 dividend share has four different asset groups – listed investments, the property trust net tangible assets (NTA), the building products NTA and development land. It also has net debt.
Most of the value of the listed investments segment is represented by Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares, the old investment conglomerate. It also owns FBR Ltd (ASX: FBR) shares, which is a business working on a bricklaying robotic truck. This segment had a worth of $2.73 billion on 31 January 2023.
Its property trusts are industrial properties that it owns half of, along with Goodman Group (ASX: GMG). These industrial properties are benefiting from higher revaluations, with strong demand and fast growth of rental potential. This provides a stable asset base for Brickworks, and growing rental profit. The property trust NTA is $2.24 billion for Brickworks.
Brickworks has a building products NTA of $577 million, which includes both the Australian building products business and the North American building products business.
It has three large parcels of land which have a combined "as is" market value of $461 million. This land has been identified for development and is planned for sale into the property trust.
Finally, it has net debt of $595 million.
Therefore, Brickworks revealed that it had a total inferred asset value of $5.4 billion at 31 January, which translates into $35.56 per share.
At the current Brickworks share price, that's a discount of around 33%. I'm not suggesting that Brickworks shares should trade at $35. But, with Brickworks being a long-term investor in the Soul Pattinson shares and the industrial properties, I believe it's worthwhile taking a very long-term view of the ASX 200 dividend share and its appealing dividend payouts.
Dividend credentials
This company's normal dividend has been maintained or grown every year since 1976. That's 47 years since the last decrease.
The result included another 5% increase in the dividend. That's a solid boost.
Brickworks' leader, Lindsay Partridge, said today:
We are proud of our long history of dividend growth, and the stability this provides to our shareholders.
Putting the last two declared dividends together, the business has a current grossed-up dividend yield of 3.8%.
While it doesn't have the biggest dividend around, I think Brickworks represents good value for the long term, and the growing dividend is attractive in this uncertain climate.
