BLD is trading at a steep 25% discount to the All Industrials ex-financials on FY18 price/earnings estimates, which is significantly below the historical trading range.

This is largely attributable to the proposed acquisition of Headwaters, reflecting the size of the transaction and concerns around coal-linked fly ash and regulatory approvals.

In our opinion, investor concerns are overstated.

The catalysts that could drive a re-rating include regulatory approvals, delivery on FY17 expectations and evidence of synergy execution.

On the technical front, since November last year an uptrend has developed, characterised by a series of higher highs and higher lows.

We like the recent compression in the shorter-term EMAs (red) and bounce from the longer-term EMAs (green). This suggests those active in the stock are willing to bid up dips and that longer-term momentum is becoming more bullish.

We are targeting a move to $6.50.

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