ASX investors looking to benefit from the AUD100bn infrastructure boom could do well by placing their bets on Boral, according to analysts at Bank of America Merrill Lynch (BAML).
The cement producer’s comparative advantage lies in its exposure to the infrastructure spend over the next decade, combined with expanding profit margins in the US.
BAML building materials analyst Sophie Spartalis said in a report on the large ASX-listed building and construction stocks that Boral is the "top pick”. She expects an earnings growth of 31 per cent in 2017-18 and 24 per cent in 2018-19. Boral CEO, Mike Kane, said on 30 August he expected the infrastructure boom in Australia to last for 10 years and to deliver more momentum than the housing boom on the eastern seaboard, according to a report in The Australian Financial Review.
Meanwhile, BAML rates Adelaide Brighton Cement, the country’s largest cement producer, as “neutral”, saying the company’s earnings stability combined with bolt-on acquisitions should support the share price. The company is "well positioned to capitalise on the Australian multi-year $100bn road and infrastructure spend". Adelaide Brighton CEO, Martin Brydon, said that the company had been able to secure price increases for pre-mixed concrete and aggregates as demand rose in the construction market.
