Aegis Research says...Babcock & Brown Infrastructure Group (BBI)...

Aegis Research says...
Babcock & Brown Infrastructure Group (BBI) - Recommendation
12 Month Target: $0.34
Recommendation: BUY

Consensus View:
Number of Brokers: 10
Average Reco: Buy
Median Reco: Buy

1 0 5 1 3
Sell UnderPerf. Hold Buy Strong Buy


Strategic Direction - BBI was established to invest in quality infrastructure assets. It intends to optimise the performance of its existing assets and to actively seek new, quality assets. These assets provide a high level of security and consistency of revenue, which, in turn, provide consistent and attractive distributions to security holders. However, in recent times this strategy has come unstuck with the collapse of debt markets and BBI is now looking to offload assets.
Risks - Revenue risk exists with the final determination of the DBCT tariff structure. Operating risks include delays in coal loading due to rail, industrial and other factors. Regulatory control risk exists with assets other than DBCT. Risks around refinancing and de-gearing are now forefront in our minds.
Primary Share Price Catalyst - Positive share price catalysts in FY09 will come from positive news flow regarding asset sales. Although not our view, it is apparent the market believes the stock too complicated and too highly geared. As such, BBI is making every effort to address these problems in order for the security price to reflect the value of BBI's underlying assets.