0 Tim Boreham
Criterion Columnist
Melbourne https://plus.google.com/116956110402704936193 Toll road operator Transurban has enhanced its credibility as a reliable yield play, with robust March quarter revenues showing that all its ribbons of bitumen are performing well.
Not necessarily flowing well at peak hour, but that’s a broader story.
Reflecting its partial ownership of some roads, Transurban’s proportional revenues soared 42 per cent to $387 million.
Given Transurban (TCL, $9.88) didn’t own Sydney’s Cross City Tunnel or Queensland Motorways last time around, like-for-like revenues still rose an impressive 11 per cent to $305m.
As a barometer of the economy, Transurban bodes well for Sydney, with traffic growth of 8 per cent.
In Melbourne, where Transurban has its foundation City Link, traffic grew around 4 per cent, although the comparison is flattered by the closure of the crucial Burnley Tunnel artery in the previous period.
Broadly, though, it’s unusual to see Transurban’s 13 roads firing at once, including its two express lanes in northern Virginia.
It’s also heartening that Queensland Motorways — acquired for $7bn as part of a consortium a year ago — is pulling its weight.
Transurban’s longer term imperative is to ensure that its roads do not become overpriced car parks as our capital city populaces keep growing. No motorist likes paying for the privilege of idling in a traffic snarl.
On Victorian government projections, City Link in its current format will run out of capacity in 10 years.
Transurban hopes technology will ease the squeeze and has teamed with parties including Singtel Optus and GPS device provider TomTom to come up with “big data”-driven traffic-flow solutions.
Another option is dynamic pricing, or congestion pricing, which Transurban uses on its north Virginian roads. But it’s a fine line between slugging motorists for the convenience or scaring them away to the free alternative.
Meanwhile, Transurban should have no trouble meeting its guided-full year distribution of 39.5c per security (compared with 35c in the previous year), having dispensed 19.5c in the first half.
On current pricing, the securities yield around 4 per cent partly franked. The stock, up 27 per cent over the last six months, has been a transport of delight for investors.
Our long-term buy call at $7.58 in August last year becomes a hold.
* The Australian accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser. The author does not own any of the
TCL Price at posting:
$9.93 Sentiment: Hold Disclosure: Held
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