Don’t let the name fool you. The investment case for Brickworks has little to do with building materials. The most valuable part of Brickworks is its 42.9% holding in Soul Pattison, which itself holds a similar stake in Brickworks. The incestuous cross holding has been the subject of much controversy but we ignore the debate and look at the value on offer today.
If we take the Soul Patts stake at market value, we estimate Brickworks is worth about $20 a share. The largest component of Soul Patts are holdings in coal miner New Hope Corporation and telecoms star TPG. One way to think about Brickworks is a discounted (and diluted) entry into TPG and New Hope, both of which provide interesting option value without being outrightly cheap. Taking a conservative approach and discounting Soul Patts market holdings by 20-30%, we think Brickworks is worth about $16 a share.