Industrials

$3bn cash bonanza for Boral shareholders: Stokes family takes lion’s share

Tue 01 Feb 22, 6:58pm (AEST)
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Key Points

  • No shares will be cancelled under the Boral capital return
  • Boral refocus on core Oz construction materials business
  • Boral will be reporting its HY22 result on Monday 14 February

Shares in Boral (ASX: BLD) were up 5.79% at the close today after cement and building products group revealed it was returning $3bn in capital return after a slew of asset sales that netted $4bn in asset sales.

It’s understood that no shares will be cancelled under the Boral capital return, with shareholders retaining the same number of shares.

Due to be paid on February 14, a cash distribution of $2.72 per share to shareholders will comprise a $2.65 capital reduction, and a 7¢ per share unfranked dividend.

Given the magnitude of its stake in Boral, the Stokes entity will receive around $2.08bn.

After having progressively increased its holding to 69.6%, the Stokes family, via its Sydney-based Seven Group Holdings – operators of WesTrac - made a takeover bid for Boral last May.

The Stokes family is said to have been instrumental in encouraging the Boral board to exit the US before it gained control of the company.

Commenting on today’s announcement, Boral CEO Zlatko Todorcevski described the planned capital return as part of the group’s disciplined and efficient capital management.

North American au revoir

After offloading $4bn in businesses, mostly in North America, Todorcevski expects the reshaped portfolio to help the group refocus on strengthening the performance and profitability of the core Australian construction materials business.

In July, Boral sold down the larger of its US building products business, comprising roofing, stone, and windows operations, to Westlake Chemical for $3.1bn.

Five months later, Boral closed the door on its remaining North America assets after offloading the group’s longstanding holding (40 years) in fly ash operations for $1bn to Eco Market Technologies, a business backed by two US private equity groups.

Boral’s North American exit coincides with the decision by chairman Ryan Stokes to add two new directors including Mark Johnson - director of Goodman Group (ASX-GMG) and Jacqueline Chow - director of Coles Group (ASX: COL) as independent directors.

Boral will be reporting its HY22 result on Monday 14 February.

What brokers’ think

  • As part of a review of industrials, Morgan Stanley upgraded Boral to Equal Weight from Underweight, with the target price steady at $6.10 (20/01/22).

  • UBS notes that the benefit of end market demand improvements is being offset by increased costs, particularly around freight and labour. However, UBS believes an improvement in commercial/apartment activity is a key catalyst going forward. The broker's Neutral rating is unchanged, and the target price falls to $6.10 from $6.45.

Boral is currently trading at a 5.9% upside to the $6.21 target price ascribed by the five brokers’ covering the stock (as reported by FN Arena). However, three of these brokers have not updated their coverage since August 2021. 

Consensus on Boral is Moderate Buy (26/08/21).

Based on Morningstar’s fair value of $6.78 the company looks undervalued, (04/01/22).

BLD

 

Three month snapshot into Boral's share price performance.

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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