In anticipation, the broker has upgraded CRH to a ‘buy’ with a raised target price of €51, which it has based on the US methodology of valuing all the various parts.
“We believe that CRH is becoming an increasingly ‘American’ company as each year passes, albeit one with a proud Irish heritage.
“We estimate that the Americas will account for 70% of profits this year, rising to 80% by 2025”.
The broker also believes CRH’s next chief executive will be American, while it already reports its results in US dollars.
Cevian Capital is also the group’s third-largest shareholder and Berenberg notes the Swedish activist investor was a big investor in Ferguson as it shed non-US assets, significantly increased the profit contribution from the US, adopted US dollar reporting and ultimately moved its primary listing to the US.
“Cevian Capital has made no public comments on CRH, but we think its presence means that pressure will remain on management to unlock the full value of the asset base, which could involve discussing a US primary listing,” said Berenberg.
At the trading level, cyclical tailwinds are also favourable with underlying profits growth of 8% and 6% over the next two years helped by the step-up in US infrastructure spending in 2022.
Add in possible structural change and CRH looks with the group also likely to generate US$8bn of surplus capital in the next five years, which could fund an extra capital return of 5% per annum.