Question 1: What do you make of Amcor’s (AMC) merger with Berry? Will this be good for Amcor shares?
Answer: Amcor is proposing to merge with Berry through an all scrip deal. Berry shareholders will get 7.5 Amcor shares for each Berry share they own, creating a “‘new” Amcor that will be approximately 63% owned by existing Amcor shareholders and 37% by Berry shareholders.
The rationale for the merger is that it will create a packaging group of $24bn in revenue and EBITDA of $4.3bn that is highly complementary, with global leadership in flexibles and containers and closures. The combined scale will allow it to accelerate growth, unlock opportunities in high-margin categories and better serve its customers in regard to sustainable products. Financially, the deal is said to deliver $650m of annual synergies (mainly from procurement savings), a double digit return on investment and over 35% cash EPS accretion.
On paper, the deal appears to make sense. Ultimately, it comes down to whether Amcor can execute (that is, put these two companies together and deliver the synergies), and that is why the market was lukewarm on the deal. While Amcor has a reasonable track record on mergers (e.g. with Bevis), this is a big deal.
In the short term, slightly negative for Amcor’s share price.
Question 2: Is there an ETF that readily allows me to invest in bank bonds and other low risk, higher income securities?
Answer: The Global X Australian Bank Credit ETF (BANK) is an index-based ETF that invests in a diversified portfolio of Australian banking debt across the full capital structure excluding shares. It comprises fixed and floating-rate bonds, senior and subordinated debt and hybrid securities. BANK has a management fee of 0.25% pa. It pays distributions monthly, which should yield around 5% to 5.5% pa. There will also be a small component of franking.
Question 3: Brambles (BXB) has recently hit an all-time high. What do the major brokers think?
Answer: Brambles has done well since it delivered a strong result in August and guided revenue growth of 4% to 6% and EBIT growth of 8% to 11% for FY25. Its first quarter result (in October) was marginally below guidance. The major brokers are neutral on the stock. While there are 4 “buy” recommendations and 2 “neutral” recommendations, the consensus target price of $19.01 is bang on the last ASX price. The range of target prices is narrow: from a low of $17.85 through to a high of $20.60. The brokers have the stock trading on a multiple of 20.3 times forecast FY25 earnings, and a prospective dividend yield of 3.1%.
Question 4: When is CUSCAL expected to start trading on the ASX?
Answer: Payments infrastructure provider CUSCAL, which is finalising an IPO at $2.50 per share, is expected to start trading on the ASX on Thursday 25 November. It will trade under the ticker CCL.
