Morgans feels a -10% share price decline in reaction to Aurizon Holdings' acquisition of One Rail for -$2.35bn is overdone. The group plans to divest One Rail's East Coast Rail via a trade sale or demerger though the analyst is not confident of an attractive exit price.

Management plans to reduce the dividend payout from 100% towards the bottom end of its 70-100% policy range for one to two years to support credit metrics. As a result of this, and the removal of assumed buybacks, the broker lowers its target price to $3.73 from $4.14.

The Add rating is unchanged.

Sector: Transportation.

Target price is $3.73.Current Price is $3.45. Difference: $0.28 - (brackets indicate current price is over target). If AZJ meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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