UPDATE 2-Bombardier gets railcar order from China Railways
(Adds analyst view, details, background, stock close. In U.S. dollars unless noted)
MONTREAL, Oct 31 (Reuters) - Bombardier Inc (BBDb.TO) said on Wednesday that its Chinese joint venture received an order for 640 high-speed train cars from the Chinese Ministry of Railways.
The order for Bombardier Sifang Power (Qingdao) Transportation Ltd. is valued at $1.5 billion, with Bombardier's share totaling $596 million. The trains will be made at Bombardier Sifang Power facilities in Qingdao.
The order calls for delivering 40 electric 16-car trainsets, which are capable of reaching speeds of 250 kilometres an hour (155 mph). Deliveries are scheduled for February 2009 to August 2010.
"It is the largest single order for rail passenger cars placed at one time in Chinese rail history," Bombardier said in a release.
Bombardier Sifang Power is a joint venture between Bombardier Transportation, Power Corp of Canada (POW.TO) and China South Locomotive and Rolling Stock Industry (Group) Corp. Bombardier currently employs 2,500 people in China through three joint ventures.
Benoit Poirier, an analyst at Desjardins Securities, said orders in the company's railcar division do not tend to influence its share price.
Yet a strong order book is a key part of the train and airplane maker's efforts to boosts its profit margin in the railcar business, and he has a C$7.65 price target on the stock.
Bombardier's class B shares rebounded 33 Canadian cents, or 6.3 percent, to C$5.60 on the Toronto Stock Exchange on Wednesday.
The shares had declined almost 10 percent over the previous 30 days on growing concerns about landing gear problems with its short-haul Q400 turboprop aircraft.
The European Aviation Safety Agency, which called for an emergency meeting with Bombardier on the matter, told Reuters that there was management level discussion on Wednesday and a technical meeting was planned for Nov. 7.
Scandinavian airline SAS (SAS.ST) removed its 28 Q400s from its fleet this week after one of the planes crash-landed in Copenhagen on the weekend. No one was injured in the incident, which occurred when a landing gear on the plane failed to lock in place.
It was the third crash-landing related to landing gear malfunctions on a Q400 in northern Europe since early September.
Jacques Kavafian, an analyst at Research Capital, said Bombardier's share price weakness over the past few weeks represents an opportunity to buy the stock, in part because he does not expect the Q400 troubles to have a material impact on the company.
"We believe that the largest issue for Bombardier at present is to reassure existing and potential customers that its aircraft are safe, and to maintain its image of a manufacturer of reliable aircraft," Kavafian wrote in a research report.
($1=$0.94 Canadian)
