Aurizon presented at the Macquarie conference.
Guidance maintained, albeit still pointing to elevated weather impacts, and availability of staff issues.
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.
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