CLIENT queries on possibility of takeover: A number of clients recently enquired whether Brambles, the world's leading provider of pallet and container pooling solutions, might be tempted to buy Goodpack.
While we are still sceptical of this, we investigate whether there are any synergies between both businesses.
Possible increase in asset turn: Goodpack's current asset turn at about 2.2 times is below that achieved by Brambles' comparable IBC (intermediate bulk containers) and container business of 4.5-6.1 times.
This difference may be due to Goodpack's more globally focused business (that is longer downtime as its IBCs have to be shifted across the globe) and exposure to the rubber industry.
However, if asset turns can be lifted to 2.8 times by cross selling with Brambles' customers, we estimate revenue upside of up to US$61 million per annum.
Transport savings: Based on historical results, Brambles' transport costs, as a percentage of revenue, stand at between 18 and 20 per cent; much lower than Goodpack's 28-29 per cent.
We envisage savings could be achieved if Goodpack were to take advantage of Brambles' existing logistics arrangements.
Maintain Buy: While we doubt Brambles would launch a takeover given its intention to pay down debt and there would be a question mark as to whether major shareholder David Lam would sell, our analysis, however, shows potential synergies between the two businesses and still untapped potential in Goodpack.
We thus recommend investors to BUY Goodpack ahead of delivery of this upside over the next three years (earnings CAGR of 17 per cent).
BUY
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