Brambles shares have rocketed ahead in morning trade (up 1.5%) as traders speculate that the share price will rally now that BXB has obtained share holder approval to buy back up to 10% of its stock, starting this week. Considering the stock has fallen close to 19% over the past 6 weeks as the takeover premium has faded, even the value investors are beginning to show interest in the company at current levels. BXB chairman, Don Argus, stated that Brambles expects to deliver another year of strong profit in 2008". Macquarie Research Equities (MRE) analysts agree with this view, after attending Fridays AGM and trading update.

Management was generally upbeat at the AGM, outlining both sales and profits for the 4 months ending October were ahead on the previous corresponding period, and in line with its expectations. Don Argus expressed a positive outlook and expects BXB to deliver strong profit growth in 2008.

Argus briefly touched on BXB's accelerated growth strategy, however did not provide any additional insights to the presentations conducted at the recent Asset tour.

CHEP Sales
Total CHEP Sales were up 6% on a like-for-like basis for the period in line with MREs expectations of +6.2%. When adjusting for the depreciation of the US dollar, CHEP Sales were up 10.8% (in USD). CHEP Americas continued its good performance, growing Sales by 9% (v MRE +8.6%) ahead of its plan to gain further market share in FMCG and penetrate the untapped US Beverages segment.

CHEP Europe experienced a slight improvement in momentum despite a relatively small increase of 2% (v MRE +2.0%). A turnaround in its volumes is an essential catalyst to change market sentiment in relation to its long term growth targets.

Don Argus flagged at the recent Asset Tour BXB would allocate significant capital expenditure to what appears to be an aging pallet pool within Europe. MRE expect the recent increase in front line staff to help drive growth.

CHEP Rest of World
CHEP Rest of World was also in line with MREs forecasts up 8% (v MRE +7.9%) and whilst only accounting for 13% of total CHEP Sales, represents the greatest upside over the long term. Importantly, CHEP have secured Coca Cola as a strategic customer in China.

Recall
Recall was up 9% (v MRE +8.6%) largely driven by its lead status in RFID technology allowing considerably more efficient inventory counting methods and a superior service.

Action and Recommendation
Key drivers for BXB remain: 1) potential for corporate activity over the next 6 months; 2) managements ability to deliver targeted revenue growth of 9-11% and execute its accelerated growth strategy; 3) turnaround volumes in CHEP Europe business.