mac says $1.60

Price catalyst
12-month price target: $1.60.
Confidence in management deliver on timing cost savings. This not likely to be a single event, but a series of them.
Action and recommendation
We are re-initiating our recommendation with an Outperform, based on the TERP of $1.30. Against our target price of $1.60, AIO offers 28% upside. On an enterprise value to earnings before interest, tax, depreciation and amortisation multiple base, we estimate AIO fair value is around $1.38.
Whilst initially the multiple valuation will dominate AIO pricing, confidence in the current management team is likely to see a shift towards the discounted cashflow valuation. We anticipate that confidence should improve through the year as AIO completes the residual coal contracts in Queensland and finalised the NSW coal contracts, starts renewing port contacts with price growth at inflation plus (CPI+), continues to demonstrate the cost reductions (albeit this is 3rd quarter event), and smoothly refinances its debt facilities.
We are re-initiating our coverage with a target price of $1.60.
The Macquarie Group acted as financial adviser to the consortium, made up of TPG Capital and Global Infrastructure Partners, that submitted a non binding indicative proposal to acquire all outstanding issued shares of the Asciano Group by way of scheme of arrangement, as announced on 4 August 2008.