BAE’s merger of its Tempest jet project with Japan’s F-X fighter can add as much as 40p per share to the weapon maker’s fair value, according to Citi.
Japan joining the GCAP programme creates critical mass without adding additional partners and removes the risk of £1.1bn a year of Typhoon jet sales not being replaced, adds the US bank.
As Japan requires a longer-range model, it opens up export opportunities in countries currently using US F-15s or Russian alternatives.
BAE should also get more sales opportunities in Asia through closer links with Japan, the bank suggests.
Adding it all up for domestic sales, exports and aftermarket gets to the 40p figure, adds Citi.
Shares in BAE eased 0.5% to 835.2p.