Brambles is facing a decision on the US$450-700m plastic pallet investment for the Costco supply chain and Credit Suisse estimates an 81% price premium is required for the plastic pallet issue fee compared to wooden pallets, in order to hit the returns target.
Hence, for Brambles to proceed it requires a commitment from Costco to cover the cost, in the broker’s view.
While it may be possible the price premium is overestimated, Credit Suisse suspects Brambles will be unlikely to proceed with the investment. Outperform rating and $13.45 target maintained.
Sector: Commercial & Professional Services.
Target price is $13.45.Current Price is $10.34. Difference: $3.11 – (brackets indicate current price is over target). If BXB meets the Credit Suisse target it will return approximately 23% (excluding dividends, fees and charges – negative figures indicate an expected loss).