JB WERE 17 March 2009"Asciano (B, TP $1.50)• We still expect...

JB WERE 17 March 2009

"Asciano (B, TP $1.50)
• We still expect that AIO will execute a partial sale of one or more of its assets in the coming months. It recently confirmed that the sale process has widened to effectively
include a potential sale of everything and anything (as opposed to just the coal assets).
This suggests that AIO must be sufficiently satisfied with the proposals it has received in order to formalise an expanded sale process (and confirm this to the market).
• The benchmark set by its current share price suggests that AIO could even sell assets at fairly low multiples (relative to historical averages) and still have a material positive impact on its share price. However for a sale to occur, we think that AIO will still require a reasonable price to be paid. The key remains its ability to maintain competitive tension among potential buyers against the backdrop of its impending refinancing in May 2010.
• Any substantial asset sale at a reasonable multiple of earnings would enable AIO to fund the likely refinancing gap when its first major debt tranche falls due in May 2010, whilst also reducing its overall gearing levels. Furthermore, it would also provide some much needed proof of value.
• Whilst the near term operating outlook is very challenging, particularly for port volumes,we believe that resolution of its refinancing concerns and deleveraging is the key stock price driver and hence can drive a gradual rerating towards our valuation over time".