AZJ
Aurizon presented at the Macquarie conference.
Guidance maintained, albeit still pointing to elevated weather impacts, and availability of staff issues.
Aurizon investor relations knows the market is twitchy, and was taking no chances on being misread, with regards to guidance, in the bolded orange letters below.
Aurizon is a long duration infrastructure stock, and was sold off on a) ESG concerns over the coal haulage arm, and b) higher interest rates, driven by higher inflation.
Some (not all) of the coal issues are reduced through the sale of East Coast Rail to Magnetic Rail Group, which has allowed the bulks business to grow as a proportion of revenues, and we view the metallurgical coal as fine (it’s really just the thermal that’s problematic).
In the short run, AZJ bears the brunt of higher discount rates; longer run the regulatory resets provide inflation and rate protection, across the network arm, as the below slide outlines, and most of the coal/bulk contracts also contain CPI-linked escalatory clauses.
Aurizon will bounce back from the weather, and has good growth optionality through the bulks business. We see it trading on an undemanding multiple, and providing decent defensive asset exposure.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.