July 16, 2007

Deutsche Bank initiates Coverage of Babcock and Brown Capital

Deutsche Bank has initiated coverage of investment company stock, Babcock and Brown Capital (ASX: BCM), with a Buy recommendation. Research analyst, Sameer Chopra, initiated coverage with a $7.00 twelve month price target.

“BCM’s initial investment in Irish carrier Eircom is starting to deliver the kind of value that we had hoped for – stable fixed line EBITDA and growth in mobile,” he said. Deutsche Bank’s forecasts for BCM are driven by the underlying performance of Eircom, forward exchange rates, and income from uninvested capital and management fees. Valuation of the stock is derived from the sum of its invested equity, plus uninvested cash at a discount, less a management fee discount.

“The continued appreciation of the Australian dollar, which could cap the gain from an eventual divestment of the Eircom asset, is the key downside risk for this stock”, he added.

Deutsche Bank’s $7.00 per share valuation of BCM is the average of four scenario-based outcomes for the equity investment in Eircom. BCM is an investment company focused on investing in listed and private entities. Its primary investment is a 57.1% interest in Eircom, the incumbent fixed line telecommunications provider in Ireland, valued at approximately A$448m. In addition to the Eircom investment, the company has A$600m in uninvested cash.

Equity rating recommendations - buy, sell or hold - are based on a current 12 month view of total shareholder return (TSR). TSR represents the percentage change in share price from current price to projected target price plus projected dividend yield.

For further information, please call:

Cathy Knezevic +61 2 8258 2792

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