Traffic could be a problem, a precipitous fall in traffic would push them towards insolvency. but in all probabilities we will see on average steady growth in the number of cars using Eastlink over the next year or two. So this won't be a problem IMHO.
The real risk I see is we see what happened in 1990/1991. Interest rates were slashed following the market crash, which allowed inflation pressures to build. Then interest rates were ramped up to double digit figures in the early 90's to combat inflation.
IMHO the stimulus we are seeing now will probably lead to inflation pressures a few years from now so we are seeing a repeat of the 1990/1991 situation. This could spell the end for CEU which loaded up with massive debt while interest rates were low. The inflation might allow them to boost tolls but IMHO rising tolls and a tough economic environment will mean people skip Eastlink and choose cheaper routes such as maybe Springvale Rd etc.
CEU Price at posting:
31.1¢ Sentiment: None Disclosure: Not Held
