Stockbrokers are now more optimistic about British Aerospace’s prospects.
Broker Charterhouse Tilney has revised up its 1997 `target’ share price from 1480p to 1547p – chiefly with an eye to the company’s cash pile of £726m and a strong order book of £19.4bn.
BAe’s cash inflow of £523m was well above City expectations, and reflects improvements in working capital, a higher than looked-for level of customer stage payments, and a hefty upgrade in the valuation of the company’s 22% stake in Orange, the mobile phones business.
Charterhouse is `very positive’, expecting the company to steadily beat the market as a whole both in earnings and dividend growth.
For this year, the broker has increased its earlier pre-tax estimate by £17m to £532m (against £456m pre-exceptionals in 1996). It expects the defence arm to increase its operating profits by 7% to £590m, and for commercial aircraft to cut its losses from last year’s £78m to £15m.
BAe’s dividend rose by 25% (to 15.625p) last year, and Charterhouse expects this year’s payment to be rounded up to 20p, covered by increased earnings.
For 1998, the broker estimates earnings of 105p, with the dividend again up 25% to 25p.