Activity Summary - Transurban (TCL), in conjunction with Transfield-Obayashi, successfully tendered in May 1995 for the CityLink contract linking the western and southern Melbourne suburbs, and by-passing the CBD area. Its single purpose company restrictions were removed in November 2001 as TCL sought opportunities across Australia and abroad. In November 2002, TCL won a 40% interest to build and manage the WestLink M7 orbital toll freeway in Sydney's west due for completion in 2006/07.
Investment View (overall) - TCL has a strong portfolio of Australian based toll road assets. It's foundation asset, the Melbourne CityLink, has a strong cash generating profile, based on solid traffic growth and rising toll income. TCL has a strong management team proving successful in its takeover of HLY and its M2 toll road and the Pocahontas Parkway in the US. The WestLink M7 combined with the M2, represents a major future cash-generating toll road.
Investment View (over the next 12 months) - TCL is a quality infrastructure investment with a sound growth and attractive distribution profile. TCL's strong operating cash profile combined with its conservatively geared balance sheet provides ample scope for regearing and fuelling its FY07 distribution guidance of 54cps. TCL is trading at a discount to our valuation and 12-month price target. BUY retained.
TCL Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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