merrill lynch recco

DATED 27th Jan-09 as part of their AUST INFRASTRUCTURE '09 OUTLOOK.

GENERAL COMMENT ON THE SECTOR -

"Dislocated debt markets still a drag on the sector: Despite the improvement in credit spreads, Aust margins remain stubbornly wide. Perhaps a bigger risk is that affshore banks are retreating from the market...given that the crisis has materially damaged balance sheets, we think the risk is that it is some time before equity balances and gearing ratios are repaired"

BBI SPECIFICALLY:

"Debt remains serviceable. Steps have been taken to repair balance sheet, and at the project level, debt serviceability remains adequate.

Risk: Divestments. Unless asset sales momentum continues, and good prices, investors are unlikely to return.

Our PO of $1.00 is based on a 12 month forward target...it is calculated using a sum of the parts DCF with a cost of equity ranging from 9.75% to 12.25%. BBI is trading on an EBITDA multiple of 9 to 11 times, based on our valuation, which is consistent with the average of the more stable utilities and the higher growth infrastructure vehicles"

Merril rate BBI a BUY and this compares to other stocks they covered in the same Report such as MAP (Neutral), Asciano (Underperform), APA (Underperform) and AIX.

Merrils top picks in the sector were DUE, TCL, MIG and SKI but they still rated BBI a BUY and there was absolutely no suggestion at all that they thought BBI would go belly up (and bear in mind the doom + gloom has been with us for quite a while now).

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The one observation I make in relation to the research is this (and one I have re-iterated previously): The ASX releases made by BBI in recent times have not contained any of the negative news consistent with stocks such as BNB, AFG, MFS, CNP, CER, REU, RJT, OZL, ABS and others.

Whether we value the opinions of Brokers/analysts and their research, the opinions carry weight - especially if you are as big as ML and others. Whether they are right or wrong, their analysis is based on the known facts of the moment and those of us who speculate here on Hot Copper on a moment-by-moment basis are perhaps too close to the flame.

Regards

Coop