UPDATE 2-BAM lifts outlook as H1 beats forecasts, shares up

(Adds shares, analyst comment, details, background)

By Harro ten Wolde

AMSTERDAM, Aug 28 (Reuters) - Dutch builder BAM Groep NV (BAMN.AS: Quote, Profile, Research, Stock Buzz) on Thursday raised its outlook for 2008 net profit after posting a 10 percent rise in first half net profit, beating forecasts and lifting shares to a two-month high. First half net profit of 131 million euros ($194 million) compared with an average analyst expectation of 113 million and individual estimates ranged from 107 million to 123 million.

The company said it expected 2008 revenues of about 9 billion euros and net profit of at least 260 million, up from a previous outlook of 250 million.

BAM shares, which are set to join the Amsterdam blue chip index .AEX next month, were up 5 percent at 11.30 euros by 0714 GMT, outperforming a flat Amsterdam midcap index .

BAM shares have lost 27 percent in the last three months, underperforming a 12 percent lower midcap index.

First half revenue rose 10 percent to 4.2 billion euros, with average analyst expectations at 4.1 billion euros.

BAM said its order portfolio remained healthy due to an increase in public contracts in its non-residential and civil engineering markets.

However, as well as its Dutch peers such as Heijmans (HEIJ.AS: Quote, Profile, Research, Stock Buzz), Ballast Nedam (BALNc.AS: Quote, Profile, Research, Stock Buzz) and unlisted Strukton; BAM also faces a market hit by rising material costs and subcontractor prices.

"Higher construction costs have increasingly led to project deferrals," BAM said, adding that for the time being, the consequences of the global credit crunch only hit its property development activities.

Petercam analyst Ton Gietman said BAM's earnings momentum will not be positive from here onwards, though this was more than fully reflected in BAM's share price already.

"In view of the very low valuation, relatively low earnings risk due to the high order book and strong execution and the sound diversification of revenues and profits we stick to our positive stance," he said, keeping a "buy" rating on the shares.

BAM said it was well on track to sell its 21.5 percent stake in the world's third largest dredging company Van Oord, with closure expected before the end of this year, in a deal that could be worth up to 600 million euros, according to analyst estimates.

On Monday, private equity NPM Capital, which owns 27.5 percent of Van Oord, told Reuters it was considering buying a part of BAM's stake together with the Van Oord family, which already owns 51 percent. (Reporting by Harro ten Wolde; Editing by Richard Hubbard and Chris Wickham) harro.tenwolde@thomsonreuters.com; +31 20 504 5017; Reuters Messaging: harro.tenwolde.reuters.com@reuters.net)) ($1=.6761 Euro)