Aurizon's FVE Maintained; Stock Looks Moderately Overvalued
We maintain Aurizon's AUD 4.50 fair value estimate despite lowering our near-term earnings forecasts. Our fiscal 2018 EBIT forecast is reduced 5% to AUD 935 million, putting it near the middle of AUD 900-960 million guidance. At the current price of AUD 5.20, the stock screens as relatively expensive. Valuation metrics--a P/E ratio of 20 times and a 5% partly franked dividend yield--are too demanding considering the modest outlook for growth and relatively high risks over the longer term. While ...Aurizon Holdings is engaged in integrated heavy haul freight railway operation; rail transportation of coal from mine to port for export markets; bulk, general and containerised freight businesses; and rail services activities. Co. has three segments: Network, which is engaged in the provision of access to, and operation and management of, the Central Queensland Coal Network; Commercial & Marketing, which is engaged in the commercial negotiation of sales contracts and customer relationship management; as well as Operations, which is engaged in the national delivery of various coal, iron ore, bulk and intermodal haulage services, and in the maintenance of rollingstock fleet assets.
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