BXB

Noting the beyond frustrated piece in the Fin from Perpetual, a fellow shareholder in BXB.

They make the point that FCF is weaker than it should be, and that the “great pallet shortage” of 2020-2022 should be a bonanza to BXB, who has the pallets.

Instead, it has been more of the “navigated well” variety, and that whilst BXB have evidenced strong pricing power, they should have raised by 30-40-50%, not the low double digits that they have done.

We agree, although the key is that we put BXB into the portfolio at $9, and have traded it round the margins since. So, buying well has moderated some of the frustration we feel, but arguably, as an inflation hedge, the strangle-hold they have on industry in a time of supply chain bottlenecks should be driving margins, earnings and ultimately returns by a far greater degree.

The AFR piece goes on to suggest that perhaps either management bow out, or they put up the “for sale” sign, given that corporate interest in the space is there (smaller competitors changing hands at EV/EBITDA’s of well over 8x).

Either way, the drumbeats for change, a little like our earlier note on LLC, auger well, in our mind, for some kind of management response. Either to tell a better story, or to monetise the bargaining power.

They have a quarterly update coming soon, and it will be interesting to see how they address the above.

Ideally, not with a downgrade, citing bad weather, or some such.

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