About the author:
- Author name:
- By Nathan Lead
- Job title:
- Senior Analyst
- Date posted:
- 30 April 2014, 10:40 AM
- Sectors Covered:
- Infrastructure, Utilities
In Queensland, seasonal weather influences were evident in the March quarter. Strong growth on previous corresponding quarter driven by BHP Mitsubishi Alliance volumes under legacy contract.
Growth in New South Wales was impacted by industrial action in February and seasonal effects.
Coal average trip length continues to grow due to longer haul contracts. We suspect this will continue to have a downward pricing influence as reported in the 1H14.
Coal - no change to FY14 coal haulage guidance at 207-212Mt, implying Q4 volumes of 49-54Mt. This accounts for weather impacts of tropical cyclone Ita. Our forecasts sit at the top end of this range.
Iron ore - volumes tracking to 30Mt in FY14. There will be a decline in FY15 due to loss of the Mineral Resources and Mt Gibson's Tallering Peak mine contracts. Our estimate for FY15 is 24.2Mt.
Freight volumes - look to be tracking marginally behind our FY14 forecast. Bulk volumes continue to have difficulties, partly offset by a 20% increase in Intermodal volumes (i.e. new customers).
What we think
The period for potential union action to impact AZJ's Qld operations is approaching (May/June). In addition, release by the regulator of its draft decision on AZJ's below rail pricing/revenue is drawing close.
As such, we retain our short-term Hold recommendation. Long-term, we continue to be very positive, and would see any share price weakness around A$5.00ps as a buying opportunity.
We retain our share price target of A$5.33.
Morgans clients can access our detailed research report on Aurizon Holdings (AZJ). If you are interested in finding out more, please contact your nearest Morgans office.
Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.