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Analysts issue praise for Bombardier after air show Add to ...

Bombardier Inc. leaves the Paris air show with 30 new firm orders for the C Series, a respectable number that has helped douse concerns about the future of the new aircraft.

Yet, reaction in the share price has hardly given investors much to celebrate; it's trading off about 5 per cent from before the air show.

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A key reason appears to be the announcement by Republic Airways Holdings Inc. that it intends to buy 40 of Airbus's A319neos aircraft, raising doubts about whether it will follow through on its deal to also buy 40 C Series.

Republic, which owns Frontier Airlines, is important to Bombardier's hopes of breaking into the market for narrow-bodied passenger jets and its 40-plane order is the largest single C Series order the Montreal-based transportation giant has.

But analysts today are modestly praising Bombardier following the yearly industry gathering - with UBS analyst Tasneem Azim commenting that the concerns over Republic are "unwarranted."

"A cancellation would make little economic sense for Republic in our view," Ms. Azim said.

"Further, it seems to us that the order for the A320/19neos was motivated by price rather than product."

She estimates that Bombardier is trading at 5.7 times enterprise value/earnings before interest, tax, depreciation, and amortization based on her 2012 estimates, against peers at 6.7 times, "an attractive entry point."

RBC Dominion Securities Inc. analyst Walter Spracklin notes that the total backlog has now grown to 123 firm orders with options on an additional 119 aircraft - and this year's air show was definitely better than what came out of the show in 2010.

"In our view, these orders are representative of a developing positive trend in new order build and goes toward proving-out the legitimacy of the aircraft."

Upside: Mr. Spracklin maintained a target price of $8.50 as well as an "outperform" rating, adding that "there remains significant uncertainty built into the share price at these levels."

Ms. Azim reiterated a "buy" rating and $8.25 12-month price target.

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Athabasca Oil Sands Corp. reported 10 per cent growth in its 2011 reserves and resources, to 9.961 billion barrels, noted UBS analyst Chad Friess. More than 80 per cent of the increase was attributable to the Birch lease, northwest of Fort McMurray, where resources expanded 65 per cent to 1.885 billion barrels.

"While the scale of ATH's resources are startling, the ultimate quality and production potential of the 100 per cent owned leases remains a key question," commented UBS analyst Chad Friess. "Given their early stage, the vast capital requirements for development and the ongoing cash burn rate, we believe a joint venture is necessary, but not overly urgent."

Upside: Mr. Friess raised his price target by 50 cents to $17 but maintained a "neutral" rating.



(Republic Airways Holdings Inc. intends to buy 40 of Airbus's A319neos aircraft. An incorrect figure appeared in earlier versions.)

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