Ann: Half Year Results Analyst Presentation, page-6

"Are you still invested in AZJ? Keen to get your thoughts on it especially in light of the recent decision on access pricing to the rail operator’s service."

@jiantan86 ,

Yes, I am an AZJ shareholder, having bought shares as part of the IPO process and on one occasion since then. I have not sold any of my shares.

The UT4 draft ruling was harsher than expected, but that compares with previous rulings which were quite generous, I thought.

That's what you get with investing in regulated infrastructure assets; sometimes the rules go in your favour, sometimes not so much. I sense that the regulator will tend to err on the conservative side when interest rates are compressed (like now), and on the side of caution when they are elevated.

However, over the life of the company, I suspect we'll find that it all ends up being a mere wash.

The issue for me for AZJ, more than the draft ruling, is the way the market is likely to value this company's stock over the coming years:

Being a regulated utility, it is really a proxy for a fixed income security. And, if global bond yields keep rising, the valuation multiples of stocks like AZJ will continue to be de-rated, I expect.

I recall, for an extended period between 2013 and 2015, AZJ being happily valued by the market at multiples EV/EBITDA multiples between 10x to 12x.

Today, it is trading on around 8.5x.

So while people might argue that the de-rating of the stock is largely complete, I fear that there is still more to go in a world where bond yields normalise.