AIO

Asciano Group (AIO) has a share price target of $6.50 from Australian stockmarket analyst Macquarie Research Equities.

Asciano Group (AIO) April volume tracker

Another solid month:

Key indicators remained positive through April with strong international container volume growth offsetting low single digit Hunter Valley export coal and automotive imports. Surprisingly, container imports continue to show strength despite concerns of a consumer discretionary slowdown.

April aggregate volume growth was 9%:

Asciano Group (AIO) has a price target of $6.50 from Australian stock analyst UBS.

Momentum continues

Group revenue growth continues at 9%:

Asciano's investor update highlights solid volume and revenue growth trends across its major divisions for the nine months to March 2008. We estimate weighted average volume growth of 7%. Container volumes were a key highlight with implied growth of 13% in the March quarter, well ahead of 6% market growth. We estimate these figures imply year-to-date group revenue growth of 9%, similar to the 9% seen in the 1H.

Asciano Group (AIO) instituted a lowermost in March 08 and is creeping higher as credit concerns in the market hit begun to ease from Australian stockmarket analyst Macquarie Research Equities.

Jumping off the Grain Train

Asciano (AIO) - Neutral

AIO has struggled heavily of late as concerns around the gearing levels of AIO has seen investors desert the stock of recent times. AIO found a bottom in March 08 and has been gradually creeping higher as credit concerns in the market have begun to ease.

Asciano Group (AIO) has a valuation of $9.82 and a Neutral recommendation using an NPV approach from Australian sharemarket analyst Macquarie Research Equities. The analysts have initiated coverage over the recently listed stock which was formed out of the restructuring of Toll Holdings (TOL) infrastructure business from Toll’s logistic assets. AIO started its life as an infrastructure company, but they doubt it will be seen as such in coming years. Analysts expect the focus will shift back to its rail roots, a theme which continues to emerge as Asciano attempts to exploit the booming resource sector, a recovering grain sector and an emerging intermodal opportunity. In a duopoly with a government-sponsored competitor, the analysts think Asciano's flexibility and nimbleness will be a strategic advantage. Rail provides a compelling opportunity, with EBITDA growth of 17% pa anticipated over the coming five years. A major contributor to this growth is coal haulage. Asciano is likely to finalise a contract involving 26 million tonnes (Mt) of coal volume in Queensland in the near future. This is a step change, with potential for more. They estimate around 100Mt of new contacts will need to be awarded in NSW and Queensland in the coming years to meet industry demand. This provides AIO with ample opportunity to make further step changes. Each 25Mt will add $0.37 to the analyst’s valuation. Intermodal will play second fiddle to the bulk haulage growth, but as for coal, the resources boom is driving the economic growth of WA and Queensland. This in turn is lifting demand for the long-haul sectors, east-west and northsouth. Combined with ongoing track improvements, this should provide AIO with steady 5-8% revenue growth pa. Asciano’s port assets are also a fantastic foundation for the company. Like an airport, Asciano's ports capture the steady growth of Australian consumer spending. The difference is that the consumption of imports is growing faster than air travel in the current economy at 7.8% and 6.5% in 2008 and 2009. Asciano's added advantage is its stable duopoly with DP World, at least for the coming five years, where volume growth will be facilitated by implementation of new technology. These items not only allow growth, but ultimately lift the barrier to entry for new players.
The analysts's Asciano valuation of $9.82 is based on an NPV approach. Combined with a yield of 5.4%, Asciano provides a 20% 12-month holding period return. This is attractive given the return can be enhanced through further contract wins in coal. However, some prudence is required as AIO has a 4.1% investment in Brambles. At three times Asciano's market capitalisation, clarity over its intentions will ultimately be more significant to the performance of the stock, thus the analysts initiate their coverage with a neutral recommendation.