Trouble on the Aurizon

Intelligent Investor

Independent Financial Research

Trouble on the Aurizon. What's interesting is that the pessimism (about coal) hasn't yet spread to rail and port-owners. On record volumes the Port of Newcastle is set to be auctioned off for a healthy price. Regal Funds Management head of equities Julian Babarczy recently picked rail owner-operator Aurizon as a stock likely to do well in the next 12 months due to increased coal-haulage volumes out of Queensland and significant cost reductions. Sure, locked in contracts make the infrastructure providers immune in the short term. But one wonders how the future for these companies can be so bright when their customers are going broke? Long term 'take or pay' contracts are great, but if coal miners starting going broke en masse, they won't mean much unless they are backed by third party guarantees. Once the coal miners are bled dry, rail and port providers are next in line. (VIEW LINK)

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Intelligent Investor
Independent Financial Research

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