Protracted nod to Aurizon-One Rail deal blunts appeal amid rising inflation - UBS

Aurizon Holdings

15/07/2022 02:36

** UBS cuts price target on Aurizon Holdings  AZJ.AX  to
A$3.95 from A$4.00, but retains "neutral" rating a day after
Australia's competition regulator approves acquisition of One
Rail Australia (ORA) 
    ** Australia's competition regulator said on Thursday it
will not oppose AZJ's acquisition of ORA for $1.75 bln (https://bit.ly/3RCg8Xq)
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    ** However, UBS says since approval took about nine months
from when the deal was announced, "market context" has altered
    ** "We think market currently places greater value on assets
with reliable, inflation-protected cash flows," says UBS as coal
prices rally, and inflation and funding costs rise
    ** AZJ's plan to separate ORA's New South Wales and
Queensland business - East Coast Rail (ECR) - may prove a
deterrent to investor-buying
    ** Uncertainty that ECR separation may have on AZJ stock "is
an overhang partly because some investors may not want to hold a
small cap pure-play coal services stock," UBS says
    ** AZJ set to lose 0.8% over the week, if losses hold - its
second straight weekly loss
    ** Two of 12 analysts rate the stock "buy" or higher, five
"hold" and five "sell" or lower; their median PT is A$3.91 –
Refinitiv data
    ** AZJ up 8% this year, as of last close, vs a 10.7% decline
in the ASX 200 benchmark index  .AXJO  

 (Reporting by Sameer Manekar in Bengaluru)
 ((Sameer.Manekar@thomsonreuters.com; Twitter: https://twitter.com/sameer_manekar))