potential long trade, page-28

Macquarie 29/03/2010 1 Outperform $9.79 34.7%

Target $9.79 (was $10.05). Reliance Rail has received a credit downgrade but Downer management has indicated it is a non-recourse vehicle and so won't require significant further equity contributions.

The broker expects these comments will offer some relief to investors who had been concerned about a possible equity issue, especially given the stock price is effectively factoring in an equity raising of around $357m.

Value remains and so the broker continues to rate the stock as Outperform.

Target price is $9.79 Current Price is $7.15 Difference: $2.64
If DOW meets the Macquarie target it will return approximately 37% (excluding dividends, fees and charges).
JP Morgan 29/03/2010 1 Overweight $9.35 28.6%

While the NSW Rail Project PPP vehicle has received a credit rating the broker notes Downer Management has indicated any possible equity contribution it may need to make will not be material and wouldn't require an equity raising.

While operationally the target remains on track the broker notes there is a risk of a fall in the internal rate of return on the broker for the company but it expects the update from management should remove some uncertainty in the market.

Overweight rating retained.

Target price is $9.35 Current Price is $7.15 Difference: $2.2
If DOW meets the JP Morgan target it will return approximately 31% (excluding dividends, fees and charges).