Australia Infrastructure: Aug-2026 Previews: Defensive earnings hold firm, but can it last?

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Australia Infrastructure: Aug-2026 Previews: Defensive earnings hold firm, but can it last?

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23 Jul 2026 20:00:00 ET │ 39 pages

Australia Infrastructure

Aug-2026 Previews: Defensive earnings hold firm, but can it last?

CITI'S TAKE

Suraj Nebhani, CFA AC

Australian infrastructure stocks have broadly outperformed the ASX 200 +61-2-8225-4829

since the last results despite higher bond yields, and negative FY27 EBITDA suraj.nebhani@citi.com

and DPS revisions, driven by rising fuel costs curtailing airline capacity and

toll road traffic. This decoupling from 10-year bond yields reflects the Howard Penny

sector's resilient, CPI-linked earnings base. With the Middle Eastern +61-2-8225-4819

conflict re-escalating, defensive positioning is likely to remain a more howard.penny@citi.com

important share price driver than underlying earnings revisions in the near

term. For August 2026 results, investors should focus on FY27 guidance Akshit Batra

quality — particularly free cash flow payout sustainability (ALX >110%), +91-22-4277-5184

capex execution (AIA's NZ$6bn programme; APA's $3bn pipeline), and any akshit.batra@citi.com

PSE5 commentary from AIA. APA and IFT remain our top BUY-rated picks,

offering the strongest combination of earnings resilience, distribution

sustainability, and long-term growth optionality.

Can the de-coupling with 10-year bond yields continue? — Australian

infrastructure stocks have historically been strongly and negatively correlated with

10-year bond yields. However, sector performance has de-coupled from bond yields

with decent share price performance despite rising bond yields, highlighting

defensiveness of earnings. With the Middle Eastern conflict re-escalating in recent