My ASX share for the week is Brickworks Limited (ASX: BKW), the building products business.
Overview of Brickworks
Brickworks is among some of the oldest businesses on the ASX. It was formed in 1934 during the depression to bring 26 brick manufacturers together to save them and create a combined business with a better performance. The new company was better able to market and distribute bricks and clay products.
These days Brickworks has a much wider range of building products on offer. It sells bricks and pavers, masonry and stone, roofing, specialised building systems, precast and cement. It's a diversified group of products. Selling a wider range means the ASX share has the potential for more total revenue if it can take decent market share for that particular product.
The company has a few key brands including Austral Bricks, Austral Masonry, Bristle Roofing and Australia Precast.
Brickworks is the biggest clay brick manufacturer in the country. Austral Masonry is the second largest masonry manufacturer. Bristle Roofing has a strong presence in all major states.
The ASX share owns a 50% stage of a growing industrial property trust along with Goodman Group (ASX: GMG). Brickworks also owns 39.4% of investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
Brickworks hasn't cut its dividend in over 40 years. It currently has a grossed-up dividend yield of 5.5%.
Why Brickworks is my ASX share for the week
At the time of writing, the Brickworks share price is down around 26% since 20 February 2020. It's actually around the price that it was at on 23 March 2020 when many ASX shares hit their COVID-19 low.
Being 26% down is an attractive decline in my opinion. It shouldn't be too surprising that Brickworks is down because there are predictions of a construction slowdown over the next 6-12 months due to COVID-19.
I'm not too worried about a slowdown though. Construction goes through cycles. This will be painful in the short-term. But we should be long-term investors, look through the negativity and see the long-term value offered by this Brickworks share price. I think the Australian construction industry will bounce back by 2022. The $25,000 HomeBuilder scheme could also help Brickworks in the shorter-term.
Brickworks recently acquired three brickmakers in the US. That move was smart in my opinion, it's now the market leader in the north east of the US. This opens up a very large market opportunity for Brickworks. Not many ASX shares have been successful at expanding into the US, Brickworks can bring its efficiency expertise to the less efficient US plants.
I think Brickworks looks good value even if you value the building products side of the business very cheaply. Its stake of the industrial property trust was worth $710 million at 31 January 2020. The Soul Patts shareholding is worth $1.83 billion. Together, that's an asset value of $2.54 billion. Brickworks has a market capitalisation of $2.25 billion.
The Brickworks share price rose by 13% over May and I think it could keep going up if investors see today's value and think about the likelihood of a longer-term construction recovery. The future return of immigration to a more normal level should also be beneficial for the construction industry.
Foolish takeaway
I think Brickworks is a high-quality ASX share with a lot of attractive assets and brands. I'd be very happy to buy shares at Brickwork's current share price of under $15. It's a robust business with a very attractive dividend track record. I believe it can comfortably endure whatever happens next with the economy.
