Babcock Ups Earnings Forecast Again, Shares Rise

Babcock & Brown, an Australian investment and advisory firm, raised its earnings per share growth forecast to at least 45 percent on Monday, boosting its shares as much as 5.5 percent.

Babcock's third profit upgrade this year comes at a time when global investment banks are riddled with billions of dollars of write-downs due to their exposure to the distressed subprime loans.

"They have been announcing a lot of deals over the last couple of months. The market has reacted positively today," said Don Williams, a fund manager with Platypus Asset Management, which oversees about A$1.5 billion (US$1.3 billion) including Babcock shares. "There is still a lot of uncertainity surrounding these businesses because of the issues in the U.S.," he added.

Babcock started the year with a 20 percent EPS growth forecast, raised it to 30 percent in May and then at least 40 percent in August.

The firm also announced the sale of some Portuguese hydro assets on Monday, and said its 2008 growth would be underpinned by a strong pipeline of transactions despite current conditions in the debt markets.

The assets sold had an enterprise value of 178 million euros ($256 million).

Investors have turned cautious towards investment banks such as Babcock & Brown and Macquarie Group in the aftermath of a global credit crisis.

"The fact that they are reasonably upbeat tells you that they are not as reliant on the wholesale funding market as some of the U.S. guys. Economic conditions are good in a lot of places around the world where these guys do business and there are still very good deal flows," Williams added.

Babcock, which manages about A$53 billion in assets globally, buys ports and utilities and bundles them into listed and unlisted funds and earns management fees in return.

Rising credit costs and volatile equity markets have soured the outlook for investment banks but Babcock's comments reassured investors. Babcock & Brown rose A$1, or 3.9%, to A$27.00, while bigger rival Macquarie rose 1.75 percent. The broader market closed 1.2 percent higher.

In November, Macquarie beat forecasts with a 45 percent rise in its first-half profit but warned that its second-half profit would only match last year's profit due to volatile markets. In August, Babcock forecast a 2007 group year profit at least A$590 million.