babcock brown forecasts raised on strong deal

28/11/2007



Upgrading Forecasts — CY07e earnings guidance will likely be beaten following the sale of wind farm assets to BBW and the IPO of B&B Air. Further, recent property sales, a strong development pipeline, wholesale infrastructure fund launches and continued strong deal flow see us raise our EPS forecasts by 3%, 5% and 11% over CY07e-CY09e. Our Target Price rises 6% to $34.45.



Strong 2H07 Deal Flow — While already ahead of guidance, the recent sale of real estate interests (German residential apartments, US malls, NSW residential apartments), completion of acquisitions (Alinta and Coinmach), and reaching financial close on two PPPs (Royal Children's Hospital and Belgian rail) have led us to raise our market-high CY07e NPAT forecast.



CY08e to Start Well — With the development pipeline almost doubling in 2008 (22% of 1H07 Net Revenue), further sales of property, wind farms and aircraft from the group balance sheet likely, and new funds yet to invest proceeds raised and contribute to earnings for a full year, CY08e should start strongly.



Cashed up at the Right Time — Notwithstanding volatile equity and credit markets, new wholesale fund launches and several sizeable asset sales in 2H07e should see investment capacity across BNB and its funds exceed the $8bn sum as at 30 June. As such, with CY08e to start well, the group appears cashed up at the right time. We reiterate our Buy call and $34.45 Target Price.