The current Brickworks Limited (ASX: BKW) share price looks like a leading buying opportunity in my opinion.
I don't own any Brickworks shares in my portfolio at present, but I already have sizeable indirect exposure through my holding of Washington H. Soul Pattinson and Co Ltd (ASX: SOL) shares.
In my opinion, after the recent Brickworks update, I think it looks very attractive as a long-term pick. As long as the Brickworks share price doesn't shoot higher over the next few days, it's likely I could buy shares when Fool's trading rules allow me to.
There are a number of different reasons why I like the business, which I'll outline below:
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Dividends
Businesses that are able to keep sustainably growing their dividends are appealing to me. Brickworks' normal dividend has been increased or maintained every year since 1976. In other words, it has been 46 years since the normal dividend was last decreased.
Dividends aren't everything, but I like the cash rewards that shareholders can receive from the company every few months.
Soul Pattinson investment
Brickworks has a 26.1% holding of the investment business Soul Pattinson. According to the ASX, Soul Pattinson has a market capitalisation of $9 billion. Brickworks has a market capitalisation of $3.05 billion, according to the ASX.
The diversified investment has "delivered strong returns over many years" for Brickworks.
Soul Pattinson has a portfolio across a number of sectors including telecommunications, resources, agriculture, building products, financial services, and healthcare.
This investment can provide a level of consistent earnings and growing dividends for Brickworks, while its building products divisions' performance can be variable. The Soul Pattinson shares can smooth out Brickworks' profit year to year.
Industrial property trust
I think this is a key part of the picture for the Brickworks share price.
This trust is owned in partnership with Goodman Group (ASX: GMG). These properties are "prime" industrial or logistics buildings which are tenanted by third party customers. The estates are across Sydney and Brisbane.
Development land already held within the trust will provide "significant" further growth for both the capital value and rental profit.
Brickworks' net asset value of this industrial trust is estimated (by the company) at $1.5 billion at 31 July 2022. This could grow over the next few years as more properties are completed.
The growing rental profit from this trust can help fund higher dividends for investors in the coming years.
Manufacturing trust
Brickworks has launched its manufacturing trust. The business is retaining 50.1% and Goodman will own the other 49.9%.
Initially, this trust will have 15 sites with a gross asset value of $416 million. Brickworks will get net cash proceeds of $193 million, which will be used to reduce debt.
With this sale, Brickworks has been able to 'realise' value after a strong run-up in industrial real estate prices.
The initial net rent is $17.75 million, with annual increases of 2.5% for most properties.
Brickworks said there are some opportunities to develop sites to improve utilisation, with development opportunities in the medium-term. Some of the sites have potential for industrial development in the long-term.
Additional building product land may be sold into the trust in future years.
Future new plant developments may be funded within the manufacturing trust structure.
Extra land
Brickworks building products division retains 100% ownership of around 5,300 hectares of operational and surplus land across Australia and North America. Brickworks said that "some of these assets have significant valuation upside if/when developed".
Land holdings include operational brick sites, quarries, clay lands, sales centres, and surplus land.
Based on independent market valuations, there are four particular owned sites that Brickworks listed that have a combined current "as is" value of $0.8 billion and a rezoned value of $1.3 billion, according to Brickworks.
Brickworks share price snapshot
Over the last month, the Brickworks share price has risen by around 10%.
