FN Arena News
Latest News
Asia
Australia
Commodities
Currencies
Economics
FYI
Sell&Buy-ology
Small Caps
Technicals
Weekly Analysis
Weekly Insights
Weekly PDF
Research Reports
Sources Of Wisdom

FNArena

Email Us

Member Login


Australia

Transport Needs More Economic Fuel
FNArena News - February 05 2013

-Transport needs more economic fuel
-Port and rail has most favoured outlook
-Logistics is stretched
-Waiting for Qantas to deliver


By Eva Brocklehurst

The transport sector is at a crossroads. It's driven as far as it can on current fundamentals but is awaiting a further rebound in the economy to fuel up. The recent rally in the share market has lifted most players in the sector, according to brokers, except perhaps Virgin Australia ((VAH)). CIMB believes this strengthening of the sector is not because of improved fundamentals, and there is a likelihood that earnings and guidance will fail to meet expectations. Macquarie also suspects that much of the recent rally stems form multiple (PE) expansion rather than an improved earnings outlook. UBS expects earnings growth will eventuate for the sector, except the airlines and Toll Holdings ((TOL)).

CIMB sees sub-sectors port and rail having the most favourable outlook. Asciano ((AIO)) and Aurizon ((AZJ)) have coal exports to thank for this. CIMB believes this justifies their share price movements and has the broker become more comfortable with forecasts. UBS expects AIO and AZJ will post earnings growth of around 25% in FY13, based on volume growth, leverage and business improvement. Macquarie is more concerned that, for AIO - rated Hold - soft trading in intermodal and container ports will be a constraint on share price. Still, the broker finds the stock looks cheap relative to the sector. Moreover, it is attractive on a price/earnings basis given strong earnings growth prospects for the next two year. AZJ has similar constraints in intermodal but Macquarie rates it a Buy. The company still enjoys earnings certainty associated with the regulated business, an under-geared balance sheet, cost reductions and improving free cash flow.

CIMB has downgraded the logistics sub sector, and Brambles (BXB) and Toll ((TOL)) to Underperform because of valuation concerns. The broker believes valuations have become too stretched relative to the underlying fundamentals of the economy. A cyclical recovery would justify re-rating these but at this stage the broker finds no catalyst. UBS expects Brambles should continue to recover, but faces earnings dilution from a recent equity raising. Toll is expected to reveal sluggish general freight and problems with offshore investments which will dilute performance. Macquarie has stated its preference for earnings certainty and a track record of delivery. Here, it has upgraded Brambles to Buy, given its steady and improving growth profile, efficiencies and earnings predictability. However, Toll gets a downgrade to Hold because it's nearing valuation and there are challenges in global forwarding and maintaining margins. In respect of nearing valuation, Macquarie also places K&S ((KSC)) in the downgrade to Hold basket.

The full story is for FN Arena subscribers only. To Subscribe click here

Or If You're New To FN Arena - click here for a trial

If you are a subscriber login here


Member Login

Username: Password:
Remember Me Lost your logon details?








Our archive tells no lies. FNArena warned its readers well before the price of crude oil peaked in 2008 the speculator bubble would deflate with devastating consequences for those holding oil company shares. In August we warned the most severe correction in modern history was forthcoming for natural resources. In 2007 we warned the problem with US subprime mortgages would prove much bigger than experts and media were anticipating (among other things).

FNArena is showing the true value of truly independent financial analysis and reporting. Our daily news reports can be trialed at no cost and with no obligations at www.fnarena.com. Simply sign up and see it for yourself.

Subscribers and trialists should read our terms and conditions, available on the website.

All material published by FNArena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.


The content of this information does in no way reflect the opinions of FNArena, or of its journalists. In fact we don't have any opinion about the stock market, its value, future direction or individual shares. FNArena solely reports about what the main experts in the market note, believe and comment on. By doing so we believe we provide intelligent investors with a valuable tool that helps them in making up their own minds, reading market trends and getting a feel for what is happening beneath the surface. This document is provided for informational purposes only. It does not constitute an offer to sell or a solicitation to buy any security or other financial instrument. FNArena employs very experienced journalists who base their work on information believed to be reliable and accurate, though no guarantee is given that the daily report is accurate or complete. Investors should contact their personal adviser before making any investment decision.
© News Network 2014. All Rights Reserved. No portion of this website may be reproduced, copied or in any way re-used without written permission from News Network. All subscribers should read our terms and conditions.