I'm expecting a strong day Monday on ASX. Maybe a 100 point rise! BRS release the HY before mkt open and it will be very positive imo, esp re FY17. Hence, despite the concern around DIBP contract due to start 01/03/17, I reckon BRS will rise significantly based on the report. Not long to wait.
From the Oz 10/02/16.
'Ferrovial’s takeover bid for Broadspectrum has taken a dramatic turn, with the Spanish firm reconsidering its proposal amid fears the company previously known as Transfield Services could miss out on a lucrative government contract.
Broadspectrum shares fell more than 13 per cent yesterday to close 16.5c lower at $1.09 after Ferrovial notified the Australian Securities Exchange it would “consider the implications” of changes made to the government tender announced on Monday.
The federal government will ask Broadspectrum and a competitor — expected to be Serco, the holder of contracts for onshore detention work — to tender again for the contract for work at Nauru and Manus Island, potentially valued at more than $2 billion.
The Ferrovial bid is dependent on Broadspectrum holding those contracts, with the company notifying investors yesterday that the “defeating condition” had been breached.
Ferrovial now has several weeks to decide whether to withdraw from the $1.35-a-share bid, which values Broadspectrum at $715 million.
It is interested in using Broadspectrum as a platform in Australia with or without the Nauru and Manus Island contract, but is concerned that a loss of that deal would make it difficult to restructure the company without absorbing significant losses.
Broadspectrum had earlier announced that the government was in final negotiations with the company over a five-year welfare and garrison support services contract at Nauru and Manus Island.
Instead, the government has awarded the Diane Smith-Gander-chaired firm a one-year extension beginning in March as it alters the scope of work to be awarded.
“The changes to the ... contract status are a significant and negative change, which adversely impacts the valuation of Broadspectrum,” Ferrovial chief executive Santiago Olivares wrote to investors.
The one-year extension provides earnings security for the medium-term, according to Broadspectrum, with contracted revenue in the next financial year expected to be $2.8bn, up from previous forecasts of about $2.3bn.
Broadspectrum upgraded its earnings guidance to as much as $300m on Monday, an increase from a December forecast of as much as $285m and earlier estimates of $265m.
It is due to release its half-year accounts early next week.
Despite this, Ernst & Young lowered its independent valuation of the Australian company to between $1.60 and $1.85 a share, compared to between $1.71 and $1.98 a share before the news of the contract change.
While Broadspectrum’s larger investors continue to back the company, some have privately told
The Australian the company would have to seriously consider bids at the lower end of the EY valuation.
Ferrovial made an earlier $2 a share bid in December 2014, which was rejected by the company — then Transfield Services — and shares traded around 85c last year before the latest takeover attempt was announced.
The market remains divided about the impact of the most recent Broadspectrum announcement.
Macquarie analysts upgraded their earnings forecasts to $287.4m for the 12 months to the end of June, and $302.2m for the following financial year, up from $271.1m and $279.4m respectively.
Macquarie has been drafted as defence adviser for Broadspectrum, while UBS is working on the takeover bid for Ferrovial.
Ord Minnett analysts told clients their earnings estimates remain “comfortably below” Broadspectrum’s own guidance for the next financial year.
“We understand that the new DIBP contract (when it is finally agreed) is likely to be on materially lower terms given fewer residents, and a more competitive tender process ... based on our estimates, the current contract could generate up to an additional $7m in (earnings) per month,” they wrote. “While we can see a pathway to the company achieving its (2016 financial year) estimates, we have concerns around its growing exposure to the oil and gas sector, and the effect a further downturn in prices could have on its pipeline.” Broadspectrum maintains the scope of the contract is being increased to deal with the additional volume of refugee status determinations.'
http://www.theaustralian.com.au/bus...l/news-story/a5330ee8f97c9603ea21eb298dad011f
