TCL transurban group

0.44%

$13.65

3) That, as a consequence of 1) and 2), Toll Revenue is...

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Transversal

1,502 Posts.

1362

30/04/18

13:22

Post #: 32767327
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Originally posted by Transversal ↑

Slides 21-22 in this presentation are the ones I find most relevant, when it comes to understanding the investment case for TCL in the context of the present inflation and yield environment.

Slide 22, in particular, correctly emphasises all the following important aspects:

1) That CPI-linked price escalation rules are embedded in all concession agreements (with the sole exception of the US business).

2) That wage growth (which is expected to be the main driver of sustainable CPI inflation in the foreseeable future) increases both the ability to pay and the value of time savings to toll road users.

3) That, as a consequence of 1) and 2), Toll Revenue is naturally linked and also inelastic to CPI inflation.

4) That (as also visually illustrated by the graph on the right of the slide) TCL’s business is therefore essentially indifferent to a rise in nominal yields, as long as real (i.e. inflation-adjusted) yields remain stable.

Regarding the debt position (discussed in slide 21), the relevant points I see are that:

1) 98% of interest rate risk is currently hedged.

2) The present cost of re-financing (at prevailing benchmark yields and credit spreads) is lower than the current cost of the debt scheduled to mature over the next two years.

3) Management are actively looking to extend the average tenor of debt, to make the most of the prevailing yield and credit spread environment.

This is exactly what I think long-term holders of TCL should stay focussed on, rather than get distracted by the daily jitters of the 10Y USD yield or by the umpteenth “rates are going up, sell the bond proxies” pitch.

IMHO & DYOR

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3) That, as a consequence of 1) and 2), Toll Revenue is naturally linked and also inelastic to CPI inflation.

Just in case it wasn’t clear, what “inelastic” means here is that traffic volumes are largely unaffected by an increase in CPI (because of point 2 above), so that Toll Revenue can increase, at constant traffic volume, in line with CPI.

TCL Price at posting: $11.68 Sentiment: Buy Disclosure: Held
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(20min delay)
Last $13.65		Change 0.060(0.44%)		Mkt cap ! $42.42B

Open	High	Low	Value	Volume
$13.62	$13.70	$13.56	$43.67M	3.201M

Buyers (Bids)

No.	Vol.	Price($)
3	3914	$13.63

Sellers (Offers)

Price($)	Vol.	No.
$13.66	2641	2

View Market Depth

No.	Vol.	Price($)
1	2255	13.630
3	3238	13.600
1	1000	13.580
1	40	13.550
1	50	13.540

Price($)	Vol.	No.
13.690	200	1
13.700	464	2
13.730	7423	1
13.740	1000	1
13.780	4400	3

Last trade - 16.10pm 25/07/2025 (20 minute delay)

TCL (ASX) Chart

3) That, as a consequence of 1) and 2), Toll Revenue is...

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