bkk investment view

Hope this Research Insight artical written on the 30 July 2009 raises some smiles.

BKN is likely to win at least 50% of QR’s wagon orders (approx $55m). We have already highlighted AIO wagon orders totalling $261m; together rail wagon orders for BKN could total at least $316m. If this were to occur this would lock in BKN's rail revenues for FY10, making a breach of its banking covenants highly unlikely. Our BKN DCF valuation is $5.06 (up 13c for DCF roll forward), and we have upgraded our price target to $5.72 (10% premium to current valuation). BKN is now trading above our valuation, having increased 193% since the 1H09 result. Given the steep valuation discount in BKN has closed and earnings risks remain in mining and Americast, we have downgraded our recommendation from Accumulate/Outperform to ACCUMULATE/MARKET PERFORM. We will review our call again at the FY09 result on 6 August 2009.