Fund Manager Summary
The fund managers believe that the outlook for Aurizon Holdings Ltd presents a significant investment opportunity due to its strong market position and stable earnings. They highlight the company’s monopoly in Queensland freight and its excellent return on equity as key attractions. In their opinion, the 5% annual share buyback and nearly 9% gross dividend further enhance its appeal. Although concerns exist regarding the company's exposure to coal, with 40% of earnings derived from coal haulage, they argue that the fears are overblown. They note that half of the coal revenue comes from coking coal, and a substantial portion of earnings stems from third-party access to its lines. At a share price of $3.70, they consider Aurizon undervalued, estimating its true value to be around $6.50.
Source: Trading View
Commentary From The Managers
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L1 Capital
31 Oct 2025
$3.43
Summary
- Aurizon (Long +8%) shares showed strength during the month.
- Limited company-specific news flow, but Aurizon reaffirmed its earnings guidance at its AGM.
- Execution of a $150m buyback program announced in August continues.
- Commodity network volumes indicate a robust start to FY26, with strong NSW and Queensland coal and WA grain volumes.
- Share price supported by a broker upgrade highlighting potential upside in the Network business.
- Australia’s rare earths deal with the U.S. may enhance medium- and long-term opportunities for the Bulks business.
- L1 Capital continues to see Aurizon as materially undervalued.
- The regulated Network business constitutes over half of the company’s value and is under-appreciated by the market.
- A strategic review announced in February includes a review of the Network ownership structure, with outcomes expected at H1 26 results.
- The Coal haulage business remains a significant cash generator for the group.
- Expectations of improving cash generation from the Bulks business, supported by growth opportunities and a tighter approach to capex.
- With strong cash flows, L1 Capital anticipates continued solid returns to shareholders through dividends and share buybacks.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
L1 Capital
31 Oct 2025
$3.43
- Aurizon (Long +8%) shares showed strength during the month.
- Limited company-specific news flow, but Aurizon reaffirmed its earnings guidance at its AGM.
- Execution of a $150m buyback program announced in August continues.
- Commodity network volumes indicate a robust start to FY26, with strong NSW and Queensland coal and WA grain volumes.
- Share price supported by a broker upgrade highlighting potential upside in the Network business.
- Australia’s rare earths deal with the U.S. may enhance medium- and long-term opportunities for the Bulks business.
- L1 Capital continues to see Aurizon as materially undervalued.
- The regulated Network business constitutes over half of the company’s value and is under-appreciated by the market.
- A strategic review announced in February includes a review of the Network ownership structure, with outcomes expected at H1 26 results.
- The Coal haulage business remains a significant cash generator for the group.
- Expectations of improving cash generation from the Bulks business, supported by growth opportunities and a tighter approach to capex.
- With strong cash flows, L1 Capital anticipates continued solid returns to shareholders through dividends and share buybacks.
Summary
Endeavor Asset Management
31 Oct 2025
$3.43
- Aurizon (AZJ) is one of the portfolio’s largest positions for Endeavor Asset Management.
- Endeavor Asset Management continues to hold due to FY26 EBITDA guidance reaffirmed at $1.68-1.75 billion.
- Dividend guidance introduced at 19-20 cents per share, equating to a 6.5% yield on the cost base.
- Higher thermal coal prices remain supportive of the investment thesis.
- While bulk freight growth has been slower than expected, it continues to diversify earnings.
- This diversification is seen as a factor that strengthens the company’s long-term outlook.
Summary
L1 Capital
16 Oct 2025
$3.33
- L1 Capital continues to hold Aurizon due to its portfolio of irreplaceable assets.
- Aurizon shares delivered a total return of 7% in the September quarter, including a 6.5 cent per share final dividend.
- Despite downgrading guidance, this was attributed to non-recurring items such as bad debt write-downs and under-recovery in network revenues.
- Underlying EBITDA was slightly ahead of analysts' expectations, which were overly pessimistic.
- Aurizon secured a landmark contract for its Volks division, enhancing its competitive positioning in the BHP Olympic Dam operations.
- After completing buybacks totalling 300 million during FY25, a new buyback program of 150 million was announced.
- L1 Capital has increased its holding in Aurizon, becoming the company’s largest shareholder.
- Aurizon is considered materially undervalued by the market, particularly its regulated networks business.
- Discussions around a new agreement with miners are progressing, which will enhance earnings certainty.
- While the coal haulage business is strong, the bulks business is expected to improve cash generation and growth opportunities.
- With strong cash flows, Aurizon is expected to deliver continued solid returns to shareholders through dividends and buybacks.
Summary
L1 Capital
30 Sept 2025
$3.19
- Aurizon Holdings Ltd. is Australia's largest rail freight operator, with a focus on unlocking intrinsic asset value.
- Operates across four key segments: Network, Coal, Bulks, and Containerised Freight.
- Network segment includes over 5,100 km of rail track, significantly contributing to earnings, especially through the Central Queensland Coal Network.
- Coal segment is stable with strong cash flows from long-term haulage contracts.
- Bulks segment has underperformed post-OneRail acquisition, but L1 Capital sees potential upside with new contracts and operational improvements.
- Containerised Freight is in early development, with expectations for improved financials as operations scale.
- Five key drivers for share price increase: under-appreciated network assets, stable coal earnings, upside potential in Bulks and Containerised Freight, reduction in growth capex, and increasing shareholder returns.
- Growth capex is expected to decline after FY26, allowing for profitable growth and improved cash flows.
- Aurizon has initiated share buybacks, indicating confidence in future cash flow generation.
- L1 Capital remains optimistic about Aurizon's long-term outlook despite recent challenges, believing the current share price does not reflect future cash flows and growth potential.
Summary
Aitken Mount Capital Partners
10 Aug 2025
$3.25
- Aitken Mount Capital Partners believes Aurizon's strategy is misaligned, advocating for the sale of its bulk business.
- Angus Aitken criticizes Aurizon's focus on bulk, noting it is their smallest business and has not delivered financial outcomes.
- Aitken suggests that selling the bulk division, even at a loss, could lead to a potential doubling of the stock value and increased dividends.
- Aitken is actively seeking a family office or billionaire investor to acquire a significant stake in Aurizon to influence management decisions.
- He emphasizes that returning capital to shareholders instead of pursuing acquisitions like One Rail could have significantly increased dividends.
- Aitken calls for a major overhaul of Aurizon's board, including the replacement of CEO Harding.
Summary
Endeavor Asset Management
31 July 2025
$3.24
- Endeavor Asset Management re-entered Aurizon Holdings (AZJ) in July due to its stable infrastructure-like earnings profile.
- Expectation of a valuation re-rate as the company transitions from thermal coal to higher bulk earnings.
- Aurizon is currently trading on 12.50x P/E and offers a greater than 6.0% dividend yield, providing good compensation for holding this strategic asset.
- The transition has faced challenges, but Endeavor is confident the company has turned a corner.
- Winning the BHP Copper haulage contract in South Australia is seen as a crucial step for the Bulk business.
- Consolidation of Bulk and Containerised Freight segments is expected to yield operational benefits.
- Endeavor anticipates FY25 results to mark a low in the earnings cycle for AZJ, with expected YoY upward revisions thereafter.
- The business has significant capacity to expand within its existing infrastructure footprint.
- Growth potential from new volumes in the Bulk Central region, particularly in light of BHP's long-term expansion ambitions.
- Key catalysts for future earnings growth include cost reduction initiatives, normalization of coal volumes, and further bulk contract wins.
Summary
L1 Capital
31 July 2025
$3.24
- Aurizon (Long +7%) shares showed strength following a trading update and a significant contract win in the Bulks segment.
- The trading update included a modest downgrade to company guidance due to non-recurring items such as bad debt write-downs and underrecovery in Network revenues.
- Despite these challenges, pre-released underlying EBITDA was slightly above analyst expectations, indicating an overly bearish outlook.
- Aurizon secured a large contract win for its Bulks division to become the rail-hauler for BHP’s Olympic Dam operations, effective October.
- This contract is a long-term growth opportunity with a high-quality counterparty, enhancing Aurizon’s competitive positioning.
- Aurizon conducted a site visit to its strategic assets, including the Gilman rail terminal and Dry Creek maintenance facilities, which have potential for increased utilization.
- L1 Capital views Aurizon as materially undervalued, particularly its regulated Network business, which represents over half of the company's value.
- The company announced a strategic review in February regarding the Network ownership structure, with results expected by year-end.
- The Coal haulage business is a substantial cash generator for the Group, while the Bulks business is expected to improve cash generation going forward.
- With strong cash flows, L1 Capital anticipates solid returns to shareholders through dividends and share buybacks.
Summary
L1 Capital
3 July 2025
$3.14
- Aurizon owns irreplaceable regulated rail infrastructure connecting Queensland coal mines to ports.
- L1 Capital views this as a high-barrier, cash-generative asset with regulatory protection and pricing certainty.
- Approximately 70% of volume is metallurgical coal, which supports steelmaking.
- L1 welcomed Aurizon’s strategic review of its network business, believing the market undervalues its core infrastructure.
- Operational improvements include a $50 million cost-saving initiative.
- A new contract with BHP at Olympic Dam is seen as a strategic win that embeds Aurizon into BHP’s growth pipeline.
- This deal could pave the way for broader bulk-haulage opportunities.
Summary
Equity Trustees Asset Management
30 June 2025
$3.03
- Aurizon has invested heavily in developing its non-coal Bulks business.
- Insufficient contract wins have not justified the capital expenditure in terms of returns.
- While long-term success may be possible, an imminent improvement is not expected.
- This lack of expected growth prompted Equity Trustees Asset Management to reassess their investment.
- Funds are believed to be better allocated to other opportunities.
Summary
Oracle Advisory Group
31 Mar 2025
$3.10
- Aurizon (AZJ) has served as a decent interest rate hedge for the portfolio.
- The company has been an underperformer in recent years.
- Oracle Advisory Group identified better investment opportunities during the market correction.
- As a result, they sold out of their position in Aurizon.
Summary
Endeavor Asset Management
31 July 2024
$3.72
- Endeavor Asset Management re-entered an investment in Aurizon Holdings (AZJ), having successfully owned it on-and-off previously.
- Expectations for FY24 results are optimistic, with forecasts suggesting performance better than anticipated.
- Gearing levels are expected to improve, surpassing the company's target.
- This improvement is projected to enable increased capital returns to shareholders through buybacks and partially-franked dividends.
- Endeavor Asset Management believes the market will positively respond to these developments.
- Current valuations provide downside protection, with potential to monetize and sell portions of its assets.
- The fund manager anticipates that stable regulated assets could achieve a higher multiple than AZJ's current trading metrics.
- Current metrics include a sub-7x FY25 EBITDA and a 6.6% yield.
Summary
L1 Capital
31 Dec 2023
$3.82
- Aurizon is the leading rail operator in Australia with over 5,000km of network rail assets.
- Holds the largest haulage operations in Australia across coal, bulk commodities, and containerised freight.
- L1 Capital identifies three key drivers for the company’s earnings outlook:
- Regulatory network earnings expected to increase as it enters a new regulatory period.
- Volume growth from contract wins and reduced weather impacts.
- Focus on operational efficiencies to enhance performance.
- This earnings growth, along with a reduction in capital expenditure and improvement in payout ratio, is expected to drive steady increases in dividends.
Summary
Cooper Investors
30 June 2023
$3.92
- Cooper Investors built a position in Aurizon (AZJ) during the quarter.
- The investment is supported by improving operating trends and attractive valuation.
- Regulated earnings (below rail coal) are expected to see strong near-term growth due to higher interest rates.
- Unregulated earnings (above rail coal and bulk) should rebound from higher volumes and better margins.
- Coal accounted for 86% of Aurizon's earnings in 1H23, presenting material near-term growth potential.
- Regulated returns for below rail business are largely known for FY24-27.
- Coal haulage volumes have been affected by above-average rainfall but are expected to improve with the El Niño event.
- Aurizon's investment in bulk aims to mitigate medium to long-term coal headwinds.
- Bulk contract returns are projected to be above the company’s cost of capital.
- Bulk is seen as a partial hedge for coal during the energy transition, given the demand for critical minerals.
Summary
Collins St Asset Management
31 Dec 2020
$3.90
- Collins St Asset Management identifies Aurizon Holdings Ltd as a potentially strong investment due to its simplicity and stability.
- Aurizon holds a monopoly position in Queensland freight, which underpins its earnings.
- The company showcases a highly stable earnings profile and an excellent return on equity.
- Management has been actively buying back shares at approximately 5% per annum.
- It offers an attractive dividend yield of almost 9% gross.
- Recent market sentiment towards coal-related businesses has created a buying opportunity for Aurizon.
- Coal haulage constitutes about 40% of earnings, with only half from thermal coal.
- 50% of earnings are generated from third-party access to its rail lines.
- The concerns surrounding the coal business are viewed as over-blown by Collins St Asset Management.
- A reduction in coal haulage could be offset by an increase in third-party access.
- At a price point of $3.70, the fundamentals indicate the company is undervalued, with a target price estimated at $6.50.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"In a landscape clouded by coal concerns, Aurizon emerges as a paradox—offering stability and substantial returns. With its monopoly in Queensland freight and robust management strategies, it seems poised to redefine value, potentially reaching $6.50 amid unwarranted skepticism."
Last Updated: 31 Oct 2025
Query The Data
Frequently Asked Questions
Who is investing in Aurizon Holdings Ltd (ASX:AZJ)?
Fund managers including Collins St Asset Management, Cooper Investors, L1 Capital, Endeavor Asset Management, Oracle Advisory Group, Aitken Mount Capital Partners and Equity Trustees Asset Management have invested in Aurizon Holdings Ltd (ASX:AZJ).
Why do fund managers invest in Aurizon Holdings Ltd?
Fund managers invest in Aurizon Holdings Ltd due to its strong monopoly in Queensland freight, stable earnings, and high return on equity. The company has a robust share buyback program and offers an attractive dividend yield of nearly 9%. Despite concerns about its coal-related revenues, which constitute about 40% of earnings, fund managers believe these fears are exaggerated. They see potential for revenue growth through third-party access to rail lines, making the stock undervalued at approximately $3.70, with an estimated fair value of $6.50.
What happened to Aurizon Holdings Ltd (ASX:AZJ)?
Fund managers are investing in Aurizon Holdings Ltd due to its strong cash generation capabilities, particularly from its regulated Network and Coal segments, which represent a significant portion of the company's value. Despite recent underperformance in the Bulks business, there are optimistic signs of improvement, notably through a new long-term contract with BHP Copper. The expectation of a valuation re-rate, driven by cost reduction initiatives and operational efficiencies, alongside a robust dividend yield and ongoing share buybacks, positions Aurizon as an attractive investment. Furthermore, the potential for unlocking value in its underappreciated assets adds to the positive outlook.