** ferrett's stock to watch

Ferret's Stock to Watch: TRANSURBAN GROUP
08:59, Wednesday, March 01, 2006

A TOLL ROAD COMPANY WITH PROFITABLE ROADS AHEAD

Sydney - Wednesday - March 1: (RWE Aust Business News)
******************************************************

OVERVIEW
********

There is good and bad in the toll road industry and a well-run
group can provide investors with a steady long-term income stream.
Dealing with the bad news first is the Sydney Cross City tunnel
which has cast doubts in potential investors' minds about the safety of
the industry.
Sydney motorists have shunned the tunnel on the basis of cost
and the State government's acquiescence of closing side roads to push
more cars into the tunnel.
The potential customers have been outraged that public roads
have been handed over to a private company.
But having said this, there is nothing wrong with the tunnel
other than price and the unprecedented deal over the roads, especially
turning William Street into a one-lane lineup.
The deal between private enterprise and the NSW Government seems
to have been an unmitigated disaster.
NSW Upper House MLC Fred Nile and chairman of a bipartisan
Government inquiry into the operations of the company and the
Government's relationship, has produced a number of suggested changes
that the Government has flatly refused to consider.
Mr Nile wants the toll reduced from $3.56 to $2.90 and the side
roads reopened, among other suggestions.
The company that springs to mind as a good example of building
up a portfolio of roads is the Transurban Group (TCL) which is involved
in the development and management of electronic toll roads.
The group is structured as a triple stapled security comprised
of Transurban Holdings Ltd, Transurban Holding Trust and Transurban
Infrastructure Developments Ltd.
TCL's main roads are the Melbourne CityLink and the Westlink M7
project in Sydney.
It should be understood that the consolidated result for the
half year to December 31, showing a net loss of $38.3 million, was the
result of the adoption of Australian equivalents to international
reporting standards for the first time.
The net impact on the income statement for the period was a
decrease in the loss of $3.4 million.
It was not comparable with the result for the previous
corresponding period.
Group highlights disclosed EBITDA (adjusted) up 58.2 per cent at
$166.6 million.
Distribution of 24.5c per stapled security was up 44 per cent on
prior corresponding period and is expected to be 80 per cent tax
deferred.
Tolling and fee revenue rose 44 per cent.
A key factor for investors in Transurban has been the
rock-steady distributions to stapled unit holders since the company's
inception 10 years ago.
They have received total returns of 26 per cent per annum
(including capital appreciation and distributions).
In individual operations Westlink M7 was opened on December 16,
eight months ahead of schedule.
Information outside the company say motorists have been
delighted with the link which appears to have been an immediate success
on the distance paid concept and time saving.
There was also an $8.3 million bonus for delivery of the tolling
system 10 months early, coupled with the successful launch of the Roam
tolling brand - 86,000 tag customers have been signed up and 140,000
vehicles registered with Roam.
Transurban has taken the right step in increasing its equity
interest from 40 to 45 per cent in Westlink M7.
There has been a renegotiation of Westlink M7 bank debt
facilities of $1.25 billion while the weighted average interest margin
on the facility is 78 basis points.
On the Hills M2 there was a successful integration of the Hills
Motorway Group.
During the period electronic express lanes were constructed and
Group synergies of $3.5 million were achieved.
The company announced the purchase of Tollaust for $37.5
million - $200 million (nominal dollars) in performance payments to be
saved over the life of the concession and 75,000 high-use tag customers
to be acquired.
Westlink M7 provided a traffic uplift on M2 - with a record
102,264 on December 21.
CityLink saw tolling revenue increase 10 per cent in the period.
The net contribution of Hills to the result was a loss of $12.8
million (before tax). Included in this result was additional
depreciation of $31.3 million as a result of the reflection of the
acquisition of the Hills Motorway Group.

SHARES UNIT PRICE MOVEMENTS
***************************

Transurban stapled securities yesterday rose 1c to $7.14.
Rolling high for the year has been $7.73 and low $6.25. Dividend is
42.5c to yield an impressive 5.95 per cent. EPS is 12.5c and p/e ratio
57.12. Shares/units on issue total 797.53 million with a market cap of
$5.6 billion.
Events after December have moved swiftly, providing further
income flows in the current year.
On January 3 Transurban entered into an agreement to acquire 100
per cent of the M2 tolling contractor, Tollaust Pty Ltd, from Abigroup
Ltd and Egis Projects SA for $37.5 million.
The acquisition entitles Transurban to receive incentive
payments of approximately $200 million (nominal dollars) over the life
of the concession assuming specific revenue and traffic thresholds are
exceeded.
In addition 75,000 high-use tags will be migrated to
Transurban's existing tolling system to generate account management cost
efficiencies. The Roam brand will be used.
Settlement of the transaction is scheduled to occur on April 30.
The Lane Cove Tunnel Company and Transurban have signed a letter
of intent for Transurban to utilise its Roam brand as the preferred tag
and electronic pass provider for the Lane Cove Tunnel.
Transurban will provide account and customer management services
for transactions processed by the Lane Cove tunnel and cleared via the
central RTA hub.
Transurban will earn a per transaction fee for its service.
On January 31 and February 1 the High Court of Australia heard
the Commissioner of Taxation's appeal against the decision of the Full
Court of the Federal Court which had unanimously decided that
Transurban's contention that concession fees are deductible in the year
in which they are incurred was correct.
The court reserved its judgment in the matter.

BACKGROUND
**********

Transurban was listed on the Australian Stock Exchange on March
15, 1996.
The company is a leading international toll road developer and
investor with major assets in Australia and emerging interests in the US
and UK.
Transurban focuses on the long-term ownership and management of
advanced electronic toll roads.
It key areas of expertise include:
* Active traffic management and forecasting
* Full electronic toll collection
* Customer service
* Concession management
* Financial management
* Project delivery.