Brickworks and Soul Patts' Earnings Diversification Shields From the Impact of Property Devaluation

We modestly lift our fair value estimates for Brickworks to AUD 31 (from AUD 30.50) and for Washington H. Soul Pattinson, or Soul Patts, to AUD 33 (AUD 32) after first-half fiscal 2024 results. Our revised fair value estimates reflect the time value of money. Brickworks reported an underlying loss of AUD 37 million, due to a noncash valuation downgrade in the firm’s property assets portfolio, and lower contributions from the firm’s cross-shareholding in Soul Patts. Nonetheless, management forewarned of an impending revaluation in late 2023; we had already incorporated this in our forecasts. Soul Patts' result was underpinned by robust growth in its strategic and private equity portfolios. Shares in Brickworks and Soul Patts screen at a 9% discount and a 7% premium to our fair value estimates, respectively.