Investec initiates BBA Aviation at 'buy'

(ShareCast News) - Investec initiated its coverage on BBA Aviation with a 'buy' rating and a target price of 225p on Friday.The broker said the stock has performed poorly since its proposed acquisition of Landmark Aviation was announced last September, "which we believe is largely due to concerns over business and general aviation movements and leverage"."We address both issues, and highlight that the economic outlook for BBA looks considerably better for the company than for the wider US business jet market," said analyst Sam Bland.At 12.1 times' the broker's estimate for the company's fiscal year 2016 earnings per share and offering a 5.1% dividend yield, Investec said BBA Aviation was attractively valued for investors that are bullish on the US economy.As well, the outlook for economic growth Stateside was "materially more positive" in those areas where BBA operates than for the wider US business jet market.The analyst added that while Investec was cautious on the progress of the US economy, he didn't expect a major slowdown yet."Any change to this outlook would cause us to revisit our investment case," Bland said.Bland also expected BBA to continue gaining share in the market for fixed-base operators.Neither did the broker expect the firm to breach any of its debt covenants although it admitted that BBA was a "highly leveraged and cyclical business".