Why is the Brickworks share price racing 6% higher today?

The Brickworks Limited (ASX: BKW) share price has been a strong performer on Tuesday.

In morning trade, the building materials company’s shares are up 6% to $21.76.

Why is the Brickworks share price zooming higher?

There have been a couple of catalysts for the strong gain by the Brickworks share price today.

The first is the release of the New Hope Corporation Limited (ASX: NHC) full year result this morning.

Brickworks is a major shareholder of the coal miner, which means it will be benefiting from the bumper dividend payment announced today.

The company was able to declare a fully franked 31 cents per share final dividend and a 25 cents per share special dividend thanks to sky high coal prices.

What else?

Also giving the Brickworks share price a big boost this morning is a broker note out of Morgans.

According to the note, the broker has upgraded the company’s shares to an add rating with a trimmed price target of $23.00.

Morgans commented:

The stock trades at a c.30% discount to the last disclosed NTA-A (Jan-22) and an 11% discount to our valuation ($23.00/share). At the current share price investors can buy several quality businesses well below replacement cost, which are likely to deliver a consistent and increasing dividend stream through time.

Expectations reduced across the board. We estimate the US building products division is trading at a c.67% discount to NTA, the Australian building products at a c.40% discount and the property trusts at a c.40% discount to NTA.

We estimate the building product divisions are trading at an implied c.7.5x FY23F EBIT, with the property trust reflecting an implied cap rate of 5.19% (10-year levered IRR of c.10%). This leaves the interest in Washington H Soul Pattinson & Company Ltd (SOL), which we estimate trades at a 10% discount to our marked-to-market NTA of $14.88/BKW share.

The post Why is the Brickworks share price racing 6% higher today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks. The Motley Fool Australia has positions in and has recommended Brickworks. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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