Babcock & Brown (BNB) Update

Submitted by Craig Strzelecki on 14 September, 2007 - 11:51

Babcock & Brown (BNB) has a share price target of $36 and a maintained Buy recommendation from stock analyst UBS. BNB has launched an IPO of Babcock & Brown Air with a stock code of FLY on the NYSE. Babcock & Brown (BNB) has announced that it has filed a registration statement to IPO B&B Air Limited with the SEC. This is expected to have a market cap of around US$773m and an initial dividend yield of 8.7%. B&B Air is focused on acquiring and leasing aircraft. The portfolio will initially have 47 aircraft (purchased off BNB & affiliates) with a weighted average age of 5.7 years, lease term of 5.9 years to 29 lessees in 16 countries. 96% of the fleet are new generation narrow bodied aircraft. A potential 5% increase in earnings. BNB's first US vehicle: The analyst sees this as positive for BNB: (1) This transaction was called out by BNB as providing upside to its guidance of 40% EPSg. They estimate this deal could add 5% to our FY07 forecasts if completed (the deal is not underwritten). (2) This is BNB’s first US vehicle, diversifyingits capital and helping its brand in the region. Development pipeline and capital strength supports growth: BNB is generating a very strong development pipeline which should help drive earnings over the MT. Further, Babcock & Brown now has access to around $8.6b in capital on its B/S and within its vehicles. This could fund around $25b of acquisitions. The analyst has a $36 SOTP derived Price Target: BNB's share price has been highly volatile over the last month given market sentiment. It is now trading on just 11.9x FY08E despite increased confidence in its MT prospects. Keyd rivers for the BNB stock: (1) Strong EPSg despite market movements (2) Expanding capital base & AUM (3) Diversified revenue. Risks for BNB stock: (1) Volatile PE, especially in the current environment (2) interest rate and market risk. Read a previous Babcock & Brown recommendation.

Babcock & Brown Limited is listed on the Australian Stock Exchange (ASX) under stock code BNB. You can view their investor website here. Babcock & Brown is involved in investment banking, structured finance advisory, arrangement and management businesses, principal investment and other wholesale financial services. BNB was listed on the ASX on 6 October, 2004. Phillip Green is the Managing Director of Babcock and Brown. Find out the meaning of the recommendations in this primer. More Babcock & Brown (BNB) shares recommendations and news. Browse for other stockbroker recommendations. Check your charts and good luck with your share trading!