The CSR Limited (ASX: CSR) share price has fallen 22% in 2022. That compares to a drop of 11% for the S&P/ASX 200 Index (ASX: XJO). CSR is a relatively small ASX 200 share within the index though.
There is a lot more uncertainty in the local and global economy at the moment. Inflation is rising in Australia and worldwide for a number of reasons. One of those reasons includes higher energy prices amid the Russian invasion of Ukraine.
The current situation is having an impact on the company’s valuation. But, it’s this valuation that is now attracting some professional investors to the business as a potential opportunity.
Let’s have a look at what one analyst is thinking about the business.
A building opportunity with this ASX 200 share
The investment team at Wilson Asset Management recently held an investment webinar to outline their current thoughts on some holdings and sectors.
Sam Koch, a senior analyst at Wilson Asset Management, was answering a question about whether WAM was looking at any companies in the building and construction sectors. His response:
I guess the sector has been heavily beaten up. Everyone is worried about the macro uncertainty with the housing market falling off a cliff, and the like. We’re actually seeing a number of really interesting opportunities. We’re positive on CSR Group, and Maas Group Holdings Ltd (ASX: MGH), which we’ve talked to in the past, both of which actually have significant property holdings which underpin their valuations and have strong order books as well, which will drive stable earnings over the next few years.
We’ve always looked for an attractive entry point, and there’s no better one than when everyone’s worried about the housing market. So we’re seeing a number of really interesting opportunities given the macro uncertainty.
Outlook and buyback
At the end of June 2022, CSR announced an on-market share buyback of up to $100 million. This is in addition to the company’s existing dividend policy. Keep in mind that share buybacks can be supportive of the CSR share price.
CSR CEO and managing director Julie Coates explained that the building products side of the business continues to perform well, with improved operational and customer outcomes across diversified market positions. Its investment plans are to lift capacity, improve performance and drive growth.
Coates said that its “robust balance sheet and strong operational performance” allow it to invest in growth while also increasing returns to shareholders through the buyback.
CSR Chair John Gillam said:
CSR has a strong balance sheet, which supports continued investment in the growth and performance strategy for our building products business. We are also progressing major property development projects that will deliver short and long-term earnings, alongside the hedged aluminium position. This highlights CSR’s strength and prospects for the coming years.
A few months ago, the ASX 200 share outlined the strong pipeline of detached housing projects. CSR expects this to continue in the year ahead as completion times lengthen.
In FY23, the company expects its property division earnings before interest and tax (EBIT) to be around $52 million. In aluminium, it has a significant hedge position. It indicated an earnings range for FY23 between $33 million to $49 million based on the current pricing and cost scenarios. Significant aluminium price and cost volatility are expected to impact the final result.
CSR share price snapshot
Over the last month, ASX 200 share CSR’s price has dropped around 2%.
