AST has become the latest in a now long line of infrastructure related corporate activity. The desire for high, stable, economically resilient margins, underpinned by regulated, monopoly-like essential services assets, continues.

AST appeared expensive, to our minds, prior to the proposed takeover…

…and now looks very much like an outlier, when controlling for Quality and Value exposures.

AST now needs to grow, to justify the new valuation.

Historically, that growth has been hard to come by, particularly in the last few years, with a number of regulatory decisions going against them.

To achieve a market like ex-ante rate of return of 7% (by decapitalising the implied future NPAT and visually comparing the resultant earnings trajectory) AST have quite a task in front of them.

Of course, if you are a pension fund with a very low (near zero!) cost of capital, well, such a trajectory might well face a very different effective discount rate.

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Please note that past performance is not a reliable indicator of future performance.

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