BXB

$23.41 32B market cap 2026-01-17

Brambles Ltd BXB BUFFETT / MUNGER / KLARMAN SUMMARY

1 SNAPSHOT

Price$23.41

Market Cap32B

2 BUSINESS

Brambles is the world's largest pallet pooling company with an unassailable network of 348 million platforms and 750+ service centres operating globally under the CHEP brand. The business enjoys a wide structural moat from network effects (more users = better collection efficiency), high switching costs (integrated into customer ERP systems), and scale advantages that enable 22% ROCI and pricing power. Management has delivered consistent improvement in returns and FCF generation, with a conservative balance sheet (1.1x leverage) and shareholder-aligned capital allocation. However, at ~22x earnings and ~3% dividend yield, the shares are fairly valued with no margin of safety. The business warrants a place on the watchlist for accumulation below AUD $19.50 (15% MOS) or aggressive buying below AUD $16.10 (30% MOS) during market corrections.

3 MOAT WIDE

World's largest pallet pooling network with 348 million platforms across 750+ service centres; deep integration into customer supply chains creates high switching costs

4 MANAGEMENT

CEO: Graham Chipchase

Good - Divested non-core (China, India), maintained conservative leverage, progressive dividend, opportunistic buybacks

5 ECONOMICS

20.6% Op Margin

22% ROIC

26.8% ROE

22.1x P/E

1.09B FCF

77% Debt/EBITDA

6 VALUATION

FCF Yield3.7%

DCF Range21 - 25

Fair value at $23.00 - no margin of safety at current price

7 MUNGER INVERSION

Kill Event	Severity	P()	E[Loss]
Plastic pallet technology disruption eroding wooden pallet advantage over 10+ years	HIGH	-	-
Major customer insourcing (top 10 customers = ~25% revenue) or cyclical recession reducing consumer goods throughput	MED	-	-

8 KLARMAN LENS

Downside Case

Plastic pallet technology disruption eroding wooden pallet advantage over 10+ years

Why Market Right

Inventory destocking by customers reducing pallet utilization (1% volume decline FY25); Market correction / recession repricing quality stocks

Catalysts

Circular economy tailwinds supporting share-and-reuse model; Price increases (2% achieved FY25) passing through inflation; Ongoing share buybacks (US$403m in FY25) enhancing EPS

9 VERDICT WAIT

A- Quality Strong - Conservative 1.1x Net Debt/EBITDA, 19x interest coverage, investment grade ratings (BBB+/Baa1)

Strong Buy$16.1

Buy$19.55

Fair Value$25

Add to watchlist with AUD $19.50 price alert; buy on 15-20% market pullback

🧠 ULTRATHINK Deep Philosophical Analysis

Brambles Ltd (BXB) - Ultrathink Analysis

Deep philosophical analysis in the Buffett/Munger tradition

The Core Question: What Makes This Business Special?

Brambles is in the business of renting wooden rectangles. That's it. Pallets. Crates. Containers. The humblest of logistics infrastructure. And yet, this unglamorous business has created one of the most durable competitive moats in the industrial world.

The genius of Brambles lies not in innovation or technology, but in the mundane mathematics of pooling. When Procter & Gamble ships detergent to Walmart, they don't want to manage pallets. They want to ship products. When Walmart receives those goods, they don't want to store pallets. They want to stock shelves. The pallet is a necessary annoyance - and Brambles has built an empire by handling that annoyance for everyone.

This is the Munger insight: find a business that removes friction from commerce. Brambles doesn't compete for attention or mindshare. It simply makes the supply chain work better. The moment you start using CHEP pallets, you stop thinking about pallets altogether. That invisibility is the moat.

Moat Meditation: The Compounding Network

The most interesting aspect of Brambles' moat is that it doesn't erode with time - it deepens.

Consider the mathematics: Every new service centre Brambles opens makes collection more efficient for everyone. Every new customer added to the network improves utilization rates. Every year that passes without a major disruption proves the model works. The network effects here are not digital (like Facebook or Google) but physical - and physical networks are extraordinarily expensive and time-consuming to replicate.

A competitor wanting to challenge CHEP would need:

$10+ billion in capital for the pallet fleet
20+ years to build service centre density
Relationships with thousands of manufacturers and retailers
The patience to lose money for a decade while reaching critical mass

Who would fund such an endeavor? For what return? The answer is nobody, which is why CHEP's market position has been essentially unchanged for 70 years.

The key insight: Brambles' moat is not a wall - it's a gravitational field. The more participants orbit around CHEP, the harder it becomes for anyone to escape.

The Owner's Mindset: Would Buffett Own This for 20 Years?

If I were structuring a family trust to hold assets for multiple generations, would Brambles qualify?

Arguments for:

The business model has worked for 70 years and shows no signs of obsolescence
Wooden pallets are sustainable (trees regrow; plastic doesn't decompose)
The circular economy megatrend is a structural tailwind
Management has demonstrated discipline: divesting non-core assets, maintaining conservative leverage, returning capital
The business is simple to understand and monitor

Arguments against:

Technology disruption is possible (IoT, blockchain tracking, plastic composites)
The business is mature - growth will track GDP at best
FX exposure creates noise in reported earnings
The company lacks the "brand love" that protects consumer franchises

On balance, this is a Buffett-worthy holding. It resembles Union Pacific or Illinois Tool Works more than Coca-Cola - an industrial compounder rather than a beloved brand. But the returns on capital are exceptional (22% ROCI), the moat is real, and the business model is self-sustaining.

The question is not "would I hold this for 20 years?" but "at what price?"

Risk Inversion: What Could Destroy This Business?

Applying Munger's inversion principle - how does Brambles go to zero?

Scenario 1: The Plastic Revolution If plastic or composite pallets become cost-competitive with wooden pallets and achieve acceptance for food/beverage use, Brambles' core advantage erodes. Plastic pallets last longer (25+ years vs 10), which destroys the recurring revenue model. However, this scenario faces headwinds: plastic sustainability concerns, higher upfront cost, and Brambles' own plastic offerings as hedge.

Probability: 15% over 20 years

Scenario 2: Customer Insourcing at Scale If Amazon, Walmart, or a consortium of major retailers decided to build their own pooling network, Brambles loses its best customers. However, 70 years of history suggests customers consistently prefer to outsource pallet logistics. The distraction of managing physical assets doesn't fit modern retail DNA.

Probability: 10% over 20 years

Scenario 3: Black Swan - Timber Collapse Massive wildfires, disease, or trade disruption could destroy Brambles' timber supply. This is the hardest risk to hedge - but Brambles has diversified sourcing (100% certified timber from multiple regions) and regeneration programs.

Probability: 5% over 20 years

Total probability of permanent capital loss: ~30% over 20 years

This is acceptable for a business of this quality, but demands a margin of safety in the purchase price.

Valuation Philosophy: Is Price Justified by Quality?

Here we encounter the central problem with Brambles as an investment today: the market correctly recognizes the quality.

At AUD $23.41, Brambles trades at:

22x trailing earnings
12x EBITDA
3.0% dividend yield (growing at 18% CAGR)
3.7% owner earnings yield

These are fair multiples for a high-quality industrial compounder. Not cheap, not expensive. The expected return from here is approximately:

6% EPS growth + 3% dividend yield = 9% total return
Below my 10%+ hurdle rate for concentrated positions

The philosophical question: Should I own great businesses at fair prices?

Graham would say no - always demand a margin of safety. Fisher would say yes - quality compounds over time. Buffett evolved from Graham to Fisher, but still demands some discount.

My answer: I will not pay fair value for Brambles. The business deserves respect, but my capital deserves protection. At AUD $19.50 (15% below fair value), expected returns improve to 11-12%. At AUD $16.10 (30% below), the opportunity becomes compelling.

The Patient Investor's Path: When and How to Act

Brambles goes on the watchlist, not the portfolio. The action plan:

Set price alerts at AUD $19.50 (Accumulate) and $16.10 (Strong Buy)
Monitor quarterly results for volume trends and ROCI trajectory
Watch for catalysts that might create a buying opportunity:
- Recession repricing quality stocks
- FX-driven translation losses
- Temporary inventory destocking
- Broad market correction (not BXB-specific)
Do not chase if the stock rises further - let it go

The patience required here is substantial. Brambles may not offer a compelling entry for 2-3 years. That's acceptable. Great businesses at fair prices are not investment opportunities - they're museums. I admire them, I learn from them, but I don't pay admission every day.

Final meditation: The greatest risk with Brambles is not losing money - it's wasting time. Capital sitting at fair-value returns could compound elsewhere at higher rates. The opportunity cost of owning Brambles at AUD $23 instead of waiting for $19.50 is meaningful over a decade.

Wait. Watch. Pounce when the price is right.

"The big money is not in the buying or the selling, but in the waiting." - Charlie Munger

Executive Summary

Investment Thesis (3 Sentences)

Brambles is the world's largest pooling company, operating an unrivalled share-and-reuse network of ~348 million pallets, crates, and containers through its CHEP brand. The business enjoys a wide structural moat from network effects, high switching costs, and scale advantages that enable pricing power and 20%+ ROCI. At current prices of ~22x trailing earnings and 3.0% dividend yield, Brambles is fairly valued; we recommend WAIT for a better entry below AUD $19.50 (15% margin of safety to fair value).

Key Metrics Dashboard

Metric	FY25	FY24	FY23	5-Year CAGR
Revenue (US$m)	6,669.7	6,520.6	6,076.8	+6.4%
Underlying Profit (US$m)	1,371.8	1,258.0	1,067.0	+11.9%
ROCI	22%	21%	19%	+4 pts
FCF before dividends (US$m)	1,094.9	882.8	313.7	-
Dividend (US cents)	39.83	34.00	26.25	+18.0%
Net Debt/EBITDA	1.12x	1.12x	1.31x	Improving

Decision Summary

Factor	Assessment	Score
Quality	A-grade: High ROCI, consistent FCF, wide moat	A-
Moat	Wide - Network effects, switching costs, scale	Wide
Management	Competent, aligned, good capital allocation	B+
Valuation	Fair value ~AUD $23, not cheap enough	Fair
Catalyst	None immediate; steady compounder	None

Recommendation: WAIT Strong Buy Price: AUD $16.50 (30% MOS) Accumulate Price: AUD $19.50 (15% MOS) Fair Value: AUD $23.00

Phase 0: Opportunity Identification (Klarman)

Why Does This Opportunity Exist?

Assessment: Limited opportunity at current prices.

Brambles is a well-covered, widely-held ASX blue chip with no obvious mispricing. The stock:

Is included in ASX 100, S&P Global ratings
Has 10+ analyst coverage
Trades at reasonable but not cheap multiples (P/E ~22x)
Shows no signs of forced selling or distress

Potential Sources of Opportunity (If Shares Decline):

Cyclical inventory destocking - Consumer goods companies occasionally destock, reducing pallet utilization temporarily (happening now per FY25 report - 1% like-for-like volume decline)
FX volatility - Australian dollar strength creates translation losses for US$ earners
Macro recession fears - Supply chain demand tied to consumer staples spending
ESG concerns - Timber sourcing, deforestation worries (company addresses with 100% certified timber)

Why This Is Not Cheap Today: The market correctly recognizes Brambles' moat and growth profile. At ~22x earnings and 3% yield, the shares are priced for modest returns. No irrational pessimism exists.

Phase 1: Risk Analysis (Inversion Thinking)

"All I want to know is where I'm going to die, so I'll never go there." — Munger

Top 10 Risks (Probability × Impact = Expected Loss)

Risk	Probability	Impact on Value	Expected Loss
1. Plastic pallet disruption	15%	-25%	-3.75%
2. Major customer insourcing	10%	-20%	-2.00%
3. Timber supply crisis (fire/disease)	10%	-15%	-1.50%
4. Regulatory carbon costs	20%	-5%	-1.00%
5. Economic recession reducing demand	25%	-15%	-3.75%
6. Competition from regional players	15%	-10%	-1.50%
7. Technology disruption (IoT competitors)	10%	-15%	-1.50%
8. FX translation losses	40%	-5%	-2.00%
9. Asset losses/theft increase	20%	-5%	-1.00%
10. ESG/reputational issues (deforestation)	5%	-20%	-1.00%
Total Expected Downside			-19.0%

Inversion Analysis: How Could This Investment Lose 50%+ Permanently?

Scenario 1: Plastic/Composite Pallet Revolution (15% probability)

If durable plastic pallets become cost-competitive and gain traction
Brambles' wooden pallet advantage erodes
ROCI compresses as replacement cycle extends from 10 years to 25+ years
Mitigation: Brambles already offers plastic solutions; timber sustainability is a moat vs plastic

Scenario 2: Major Customer Vertical Integration (10% probability)

If top customers like Walmart, P&G, Unilever decide to own their own pallets
Brambles loses 5-10% of revenue from single customer
Mitigation: Years of precedent show customers prefer not to manage pallet logistics; core competency mismatch

Scenario 3: Black Swan - Timber Supply Collapse (5% probability)

Massive wildfires, disease, or trade restrictions destroy timber supply
Brambles cannot replace pallets at scale
Mitigation: Diversified global sourcing, 100% certified timber, second-tree regeneration program

Bear Case Summary (3 Sentences)

If plastic pallets achieve cost parity with wooden pallets, and major customers begin in-sourcing pooling operations, Brambles' network advantage erodes over 5-10 years. Combined with an extended recession reducing consumer goods throughput, revenue could decline 15-20% while capital intensity rises. At 15x depressed earnings, shares could trade at AUD $14 (−40% from current).

Pre-Defined Sell Triggers

Thesis Break: ROCI falls below 15% for 2+ consecutive years
Moat Erosion: Plastic pallet market share exceeds 30% globally
Management Failure: Major acquisition destroying value (ROCI dilution >3 pts)
Competitive Loss: Top 3 customer lost to competitor or insourcing
Capital Discipline Failure: Net Debt/EBITDA exceeds 2.5x without clear rationale

Phase 2: Financial Analysis

Business Overview

Brambles operates through its CHEP brand, providing share-and-reuse pallets, crates, and containers to manufacturers, retailers, and logistics providers globally. The business model:

Customer pays per cycle - Manufacturer rents pallets from CHEP, uses them to ship goods to retailer
CHEP collects from retailer - Network of 750+ service centres retrieves pallets
Repair and reuse - Pallets inspected, repaired, and sent back into circulation
Asset life: ~10 years - Wooden pallets typically last 30+ cycles over 10 years

Revenue Segments (FY25):

CHEP Americas: ~40% of revenue
CHEP EMEA: ~45% of revenue
CHEP Asia-Pacific: ~15% of revenue

ROE Decomposition (DuPont Analysis)

Component	FY25	FY24	FY23	FY22	FY21
Net Profit Margin	13.4%	12.0%	11.7%	10.7%	10.0%
Asset Turnover	0.70x	0.75x	0.74x	0.72x	0.74x
Financial Leverage	2.86x	2.71x	2.68x	2.65x	2.52x
ROE	26.8%	24.2%	23.3%	20.6%	19.0%

Analysis: ROE has improved consistently over 5 years, driven primarily by margin expansion (from 10% to 13.4%). Asset turnover is stable; leverage modest. This is quality improvement.

Return on Capital Invested (ROCI)

ROCI = Underlying Profit / Average Capital Invested

Metric	FY25	FY24	FY23	FY22	FY21
Underlying Profit (US$m)	1,371.8	1,258.0	1,067.0	930.0	874.6
Capital Invested (US$m)	~6,200	~5,755	~5,594	~5,168	~4,736
ROCI	22%	21%	19%	18%	18%

Analysis: ROCI well above WACC (~8-9%). The business generates substantial economic profit. ROCI improvement from 18% to 22% reflects transformation benefits.

Owner Earnings Calculation

Owner Earnings (FY25) = Net Income + D&A - Maintenance CapEx - ΔWC

Where:
- Net Income: US$896m (continuing operations: $864m)
- Depreciation & Amortization: US$823m
- IPEP (Irrecoverable Pooling Equipment): US$94m
- Total D&A equivalent: US$917m
- CapEx: US$969m
- Maintenance CapEx estimate: ~US$700m (pooling equipment replacement)
- Working Capital Change: minimal

Owner Earnings = 864 + 917 - 700 - 0 = US$1,081m

Owner Earnings per Share: US$0.78 (1,383m shares) Owner Earnings Yield: 3.7% (at US$21 = AUD$23.41)

Free Cash Flow Analysis

Metric	FY25	FY24	FY23	FY22	FY21
Cash Flow from Operations	1,459.9	1,307.7	789.8	391.8	901.1
CapEx	(968.6)	(999.8)	(1,567.1)	(1,787.0)	(1,219.0)
FCF before dividends	1,094.9	882.8	313.7	(391.2)	470.0
Dividends	(531.5)	(406.0)	(364.1)	(321.7)	(302.4)
FCF after dividends	563.4	476.8	(50.4)	(712.9)	167.6

Analysis: FCF has improved dramatically since FY22/23 transformation. The company is now comfortably generating US$750m+ FCF before dividends annually, supporting dividend growth and buybacks.

Valuation Trinity

1. Liquidation Value (Floor)

Item	US$m
Current Assets	1,894.0
Less: Total Liabilities	(6,218.8)
Net Current Asset Value	(4,324.8)

NCAV is negative - this is not a Graham net-net. The floor is book value.

Tangible Book Value:

Total Equity: US$3,350.2m
Less Goodwill & Intangibles: US$(254.0)m
Tangible Book Value: US$3,096.2m
TBV per share: US$2.24 = AUD $3.50

Liquidation value provides negligible protection. This is a going concern investment.

2. Going Concern Value (DCF)

Assumptions:

Revenue Growth: 4% CAGR (conservative, below recent 6%+)
EBITDA Margin: 34% (stable)
Capex/Revenue: 14% (normalizing)
Tax Rate: 30%
WACC: 8.5%
Terminal Growth: 2.5%

10-Year DCF Model:

Year	Revenue	EBITDA	FCF	PV Factor	PV
1	6,936	2,358	1,100	0.922	1,014
2	7,214	2,453	1,144	0.850	972
3	7,502	2,551	1,190	0.783	932
...	...	...	...	...	...
10	9,872	3,357	1,566	0.442	692
Terminal			27,478	0.442	12,145
Total					22,000

DCF Fair Value: US$22.0 billion = US$15.90/share = AUD $24.85

3. Private Market Value (Comparable Transactions)

Comparable pooling/logistics M&A transactions:

IPL Plastics (2019): 10x EBITDA
Tosca (2020): 12x EBITDA
Typical industrial logistics: 9-11x EBITDA

Brambles EBITDA: US$2,288m

Private Market Value Range:

Conservative (9x): US$20.6B = AUD $23.60/share
Mid (10x): US$22.9B = AUD $26.25/share
Aggressive (11x): US$25.2B = AUD $28.90/share

4. Relative Valuation

Company	EV/EBITDA	P/E	Dividend Yield
Brambles	12.3x	22.1x	2.9%
Peer Avg (Industrial Services)	10-12x	18-22x	1.5-3%
Premium Justified?	Yes - moat, returns	Fair	Attractive

Valuation Summary

Method	Value (AUD)	vs Current Price
Tangible Book Value	$3.50	-85% (not meaningful)
DCF (Conservative)	$24.85	+6% upside
Private Market (10x)	$26.25	+12% upside
Owner Earnings (15x)	$25.00	+7% upside
Weighted Fair Value	$23.00	-2%

Margin of Safety at Current Price: -2% (No margin; fairly valued)

Required Entry Prices:

Strong Buy (30% MOS): AUD $16.10
Accumulate (15% MOS): AUD $19.55

Phase 3: Moat Analysis

Moat Sources & Durability

1. Network Effects (Width: Wide)

Description: Brambles' 750+ service centres and ~348 million platforms create a network that is difficult to replicate. The more participants use CHEP, the more efficient collections become.

Measurement:

Service centre density: 750+ locations globally
Asset base: 348 million platforms (largest globally)
Customer relationships: Serving world's largest brands (P&G, Unilever, Walmart, Costco)

Evidence of Moat:

Customer retention >95% (implied from stable revenue)
Pricing power: 2% price increases achieved in FY25
Net Promoter Score improvement: +16 pts vs FY21

Durability: High - network built over 70+ years; would take competitor $10B+ and 20+ years to replicate

2. Switching Costs (Width: Wide)

Description: Switching from CHEP requires:

Renegotiating supply chain contracts
Changing tracking systems (barcodes, RFID)
Managing different collection networks
Training staff on new procedures
Potential quality/service disruption

Measurement:

Cost to switch ≈ 2-3 years of pooling fees
Integration with customer ERP systems
Long-term contracts (typically 3-5 years)

Evidence:

Low churn despite commodity-like product
Multi-year contracts with major customers
Deep integration with customer supply chains

Durability: High - switching costs are structural, not based on temporary factors

3. Scale Advantages (Width: Narrow-to-Wide)

Description: Brambles' scale enables:

Lower cost per pallet (manufacturing volume)
More efficient transport (backhaul optimization)
Better asset utilization (pooling math)
Technology investment spread over larger base

Measurement:

Revenue/employee: ~US$560K (efficient)
Asset efficiency improving: Pooling CapEx/Sales improved 8 pts since FY21
ROCI at 22% vs smaller competitors at 10-15%

Durability: Moderate - scale advantages compound but can be matched over time by well-funded competitors

4. Cost Advantages (Width: Narrow)

Description: Through scale and efficiency:

Timber purchasing power
Transport optimization
Repair automation
Shared infrastructure

Durability: Moderate - cost advantages are meaningful but not insurmountable

Moat Durability Assessment

Threat	Severity (1-5)	Timeline	Brambles' Mitigation
Plastic pallet technology	3	10+ years	Own plastic offering, sustainability positioning
New entrants	2	5-10 years	Barriers to entry remain high
Customer insourcing	2	Ongoing	Complexity of pooling deters insourcing
Digital disruption	2	5+ years	Investing in BXB Digital, IoT integration
Regulatory change	2	Variable	Strong ESG positioning, 100% certified timber

Key Question: "Will this moat be wider or narrower in 10 years?"

Answer: Wider. Brambles is investing in digitalization (BXB Digital), strengthening sustainability credentials, and expanding network density. The circular economy tailwind supports wooden pallet pooling. Scale advantages compound.

Moat Rating: WIDE Moat Trajectory: WIDENING

Phase 4: Management & Capital Allocation

Executive Leadership

Role	Name	Tenure	Assessment
CEO	Graham Chipchase	7 years	Strong operator, delivered transformation
CFO	Juan Gil	3 years	Competent, financial discipline
Chair	John Mullen	9 years	Experienced, governance-focused

Compensation Analysis

Component	CEO (FY25)	Alignment
Base Salary	~US$1.6m	Reasonable
STI (Cash + Shares)	~US$2.5m	Tied to Underlying Profit, CFO, personal
LTI (Share Awards)	~US$1.5m	Tied to TSR, ROCI, Revenue CAGR
Total	~US$5.6m	Moderate, well-aligned

Assessment: CEO compensation is reasonable for company size. 60%+ is tied to performance metrics. LTI vests over 3 years with ROCI and TSR hurdles - aligned with shareholders.

Capital Allocation Track Record (FY21-FY25)

Use of Capital	Amount (5-yr)	Assessment
Dividends	US$2,010m	Good - progressive policy, 62% payout
Buybacks	US$403m (FY25)	Good - opportunistic, accretive
M&A	Minimal	Neutral - divested non-core (China, India)
CapEx	US$5,541m	Essential - maintaining pallet fleet
Debt Management	Net Debt stable	Good - conservative 1.1x leverage

Capital Allocation Grade: B+

Management has demonstrated discipline:

Sold non-core businesses (CHEP China, CHEP India)
Maintained conservative leverage
Returned cash via dividends (growing) and buybacks
Invested in transformation (digital, automation)

Insider Activity (FY25)

No significant net sales by directors. Share grants vesting normally. CEO continues to accumulate through LTI.

Insider Sentiment: Neutral-to-Positive

Phase 5: Decision Synthesis

Quality Assessment

Criterion	Result	Score
ROE > 15%?	Yes (27%)	Pass
ROCI > WACC?	Yes (22% vs 8.5%)	Pass
Consistent FCF?	Yes (US$1B+ now)	Pass
Moat identifiable?	Yes (Wide)	Pass
Management aligned?	Yes	Pass
Simple business?	Yes	Pass
10yr earnings stability?	Yes	Pass

Quality Grade: A-

Graham Criteria Check

#	Criterion	BXB Result	Pass?
1	Adequate Size	US$6.7B revenue	Yes
2	Strong Financial Condition	1.1x Net Debt/EBITDA	Yes
3	Earnings Stability	Positive 10 years	Yes
4	Dividend Record	20+ years dividends	Yes
5	Earnings Growth	+11.9% CAGR	Yes
6	Moderate P/E	22x (>15)	No
7	Moderate P/B	9.6x (>1.5)	No

Graham Number:

Graham Number = √(22.5 × EPS × BVPS)
             = √(22.5 × US$0.65 × US$2.42)
             = √(35.4)
             = US$5.95 = AUD $9.30

Current price AUD $23.41 is well above Graham Number - NOT a Graham bargain.

Megatrend Resilience

Megatrend	Score	Notes
China Tech Superiority	+1	Immune - domestic focus in each region
Europe Degrowth	-1	Exposed - 45% EMEA revenue
American Protectionism	+1	Neutral-Positive - local production
AI/Automation	+1	Benefits - using automation in repair
Demographics/Aging	0	Neutral
Fiscal Crisis	+1	Essential service, defensive
Energy Transition	+2	Benefits - circular economy champion
Total	+5	Tier 2: Resilient

Position Sizing Formula

Position Size = Base × (MOS/Target) × (Quality/100) × (1-Risk) × Catalyst Mult.
             = 3% × (0%/20%) × (85/100) × (1-0.19) × 0.7
             = 0%

At current prices, position size = 0% (no margin of safety)

Expected Return Probability Tree

Scenario	Probability	5-Year Return	Weighted
Bull Case (25x P/E, 8% EPS CAGR)	20%	+60%	+12%
Base Case (20x P/E, 6% EPS CAGR)	50%	+25%	+12.5%
Bear Case (15x P/E, 3% EPS CAGR)	25%	-10%	-2.5%
Disaster (10x P/E, 0% EPS)	5%	-50%	-2.5%
Expected Return	100%		+19.5%

Annualized Expected Return: ~3.6% (excluding dividends) + 3% dividend = ~6.6% total

This is below our 10%+ hurdle rate without margin of safety.

Investment Recommendation

Summary

┌─────────────────────────────────────────────────────────────────┐
│                     INVESTMENT RECOMMENDATION                    │
├─────────────────────────────────────────────────────────────────┤
│ Company: Brambles Ltd              Ticker: BXB.AX               │
│ Current Price: AUD $23.41          Date: 2026-01-17             │
├─────────────────────────────────────────────────────────────────┤
│ VALUATION SUMMARY                                                │
│ ┌─────────────────────────┬─────────────┬─────────────────────┐ │
│ │ Method                  │ Value (AUD) │ vs Current Price    │ │
│ ├─────────────────────────┼─────────────┼─────────────────────┤ │
│ │ Graham Number           │ $9.30       │ N/A (quality adj)   │ │
│ │ Tangible Book Value     │ $3.50       │ N/A (floor)         │ │
│ │ DCF (Conservative)      │ $24.85      │ +6% upside          │ │
│ │ Private Market Value    │ $26.25      │ +12% upside         │ │
│ │ Owner Earnings (15x)    │ $25.00      │ +7% upside          │ │
│ └─────────────────────────┴─────────────┴─────────────────────┘ │
│                                                                  │
│ INTRINSIC VALUE ESTIMATE: AUD $23.00                            │
│ MARGIN OF SAFETY: -2% (None)                                    │
├─────────────────────────────────────────────────────────────────┤
│ RECOMMENDATION:  [ ] BUY  [ ] HOLD  [ ] SELL  [X] WAIT          │
├─────────────────────────────────────────────────────────────────┤
│ STRONG BUY PRICE:                   AUD $16.10 (30% below IV)   │
│ ACCUMULATE PRICE:                   AUD $19.55 (15% below IV)   │
│ FAIR VALUE:                         AUD $23.00                  │
│ TAKE PROFITS PRICE:                 AUD $27.60 (20% above IV)   │
│ SELL PRICE:                         AUD $34.50 (50% above IV)   │
├─────────────────────────────────────────────────────────────────┤
│ POSITION SIZE: 0% (await better entry)                          │
│ CATALYST: None immediate - steady compounder                    │
│ PRIMARY RISK: Plastic pallet disruption, recession              │
│ SELL TRIGGER: ROCI < 15% for 2 years, major customer loss      │
└─────────────────────────────────────────────────────────────────┘

Final Verdict

Brambles is a high-quality, wide-moat business that is fairly valued.

What I Like:

Dominant global position in pallet pooling
Structural moat from network effects and switching costs
Improving returns (ROCI 18% → 22%)
Strong FCF generation (~US$1B/year)
Conservative balance sheet (1.1x leverage)
Growing dividend (18% CAGR)
ESG leader (100% certified timber, circular economy)

What I Don't Like:

No margin of safety at current price
Cyclical exposure to consumer goods supply chain
FX translation risk (USD presenter, AUD listing)
Modest growth (revenue CAGR ~6%)
No near-term catalyst for re-rating

Action Plan:

Add to watchlist with AUD $19.50 alert
Monitor quarterly results for volume trends
Buy on 15-20% pullback (recession, market correction)
Size at 2-3% of portfolio if purchased

Quality Grade: A- Tier: T2 Resilient Recommendation: WAIT for better entry

Sources Used

Primary Documents Downloaded

Document	Source	Local Path
Annual Report FY25	brambles.com	/analyses/BXB/data/annual-report-2025.pdf
Annual Report FY24	brambles.com	/analyses/BXB/data/annual-report-2024.pdf
Annual Report FY23	brambles.com	/analyses/BXB/data/annual-report-2023.pdf
Annual Report FY22	brambles.com	/analyses/BXB/data/annual-report-2022.pdf
Annual Report FY21	brambles.com	/analyses/BXB/data/annual-report-2021.pdf
Annual Report FY20	brambles.com	/analyses/BXB/data/annual-report-2020.pdf

API Data Retrieved

API	Data	Source
EODHD	Historical prices (5 years)	get_historical_stock_prices
EODHD	Live price	get_live_price_data
EODHD	Dividend history	get_upcoming_dividends

Key Citations

Five-Year Financial Summary: Annual Report FY25, p.190
Consolidated Income Statement: Annual Report FY25, p.87
Consolidated Balance Sheet: Annual Report FY25, p.88
ROCI calculation: Annual Report FY25, Remuneration Report p.33
Risk Factors: Annual Report FY25, Sustainability Report pp.163-180