Transurban Group(TCL)

Team Veye | 10 Mar 2020 ASX - TCL
Transurban Group(TCL)
Call Buy
Investment Duration Long Term
Asx TCL

Transurban Group (ASX: TCL) is an Australia-based toll-road operator. The Company builds and operates toll roads in Melbourne, Sydney, and Brisbane, as well as in Greater Washington, United States and Montreal, Canada. It is also engaged in research and development of tolling and transport technology. Its segments include Melbourne, Sydney, Brisbane, and North America. Melbourne segment includes CityLink and West Gate Tunnel. Sydney includes Lane Cove Tunnel, Hills M2 Motorway, Cross City Tunnel, and Interlink M5 Motorway. Brisbane segment includes its interests in Logan Motorway, Gateway Motorway, Go BetweenBridge, Clem 7, Legacy Way and AirportlinkM7. North America includes 95 Express Lanes, 495 Express Lanes, and A25. It operates approximately 17 toll roads in Sydney, Melbourne and Brisbane, Australia, as well as in the Greater Washington Area and Montreal in North America. (Profile source: Reuters)

From the Company Reports 

Transurban 1H20 Results

Transurban Group (ASX: TCL) on 11 February 2020 announced its 1H20 Results.

(Graphic Source – Company Reports)

1H20 highlights: 

  • Average daily traffic (ADT) grew by 2.3% 
  • Proportional toll revenue increased by 8.6% to $1,396 million 
  • Proportional earnings before interest, tax, depreciation and amortisation (EBITDA) and before significant items increased by 9.5% to $1,094 million 
  • FY20 distribution guidance reaffirmed at 62.0 cents per security (cps) 
  • 1H20 distribution of 31.0 cps, fully covered by free cash flow $927 million 
  • Statutory profit of $162 million 
  • Underlying cost growth of 2.0% reflecting cost discipline and recent investments providing scale benefits 
  • 381,000 hours average workday travel-time savings from July to December 2019 
  • Substantial progress to supply up to 80% of electricity needs for Brisbane and Sydney operations from renewable sources 
  • Road Injury Crash Index tracking at 3.90 for 1H20, the lowest score since we introduced the RICI in FY14 with Transurban roads up to 68% safer than alternatives 
  • The West Gate Tunnel Project D&C contractor has purported to terminate the D&C subcontract and also noted their intention to continue works on the site. Transurban does not consider the D&C subcontract has been validly terminated and, as such, the contract remains valid

 

(Graphic Source – Company Reports)

Key network activities 

Sydney 

  • Proportional toll revenue increased by 10.8% to $569 million 
  • ADT increased by 2.2% to 839,000 trips, with growth impacted by softer economic conditions and weaker housing construction activity 
  • EBITDA excluding significant items increased by 11.0% 
  • Average workday traffic increased by 2.1% and average weekend/public holiday traffic increased by 2.0% 
  • Car traffic increased by 2.8% and large vehicles decreased by 3.7% 
  • WestConnex acquisition remains ahead of the investment case

 

Melbourne 

  • Proportional toll revenue increased by 3.7% to $424 million 
  • ADT increased by 1.1% to 867,000 transactions, with growth impacted by softer economic conditions and weaker housing construction activity 
  • EBITDA increased by 2.1% 
  • Average workday traffic increased by 0.6% and average weekend/public holiday traffic increased by 2.2% 
  • Car traffic increased by 0.7% and large vehicles increased by 3.0%

 

(Graphic Source – Company Reports)

Brisbane

  • Proportional toll revenue increased by 6.6% to $217 million
  • ADT increased by 3.6% to 424,000 trips 
  • EBITDA increased by 12.4% 
  • Average workday traffic increased by 3.0% and average weekend/public holiday traffic increased by 4.3% 
  • Car traffic increased by 3.7% and large vehicles increased by 3.1% 
  • Construction of network operations centre underway to consolidate all Transurban’s traffic control rooms in Brisbane into a single facility

 

North America 

  • Proportional toll revenue increased by 16.2% to $186 million 
  • ADT increased by 6.2% to 156,000 trips
  • EBITDA excluding significant items increased by 24.7% 
  • Average workday toll revenue on the 95 Express Lanes increased by 17.1%. The average dynamic toll price was USD9.32 
  • Average workday toll revenue on the 495 Express Lanes increased by 3.3%. The average dynamic toll price was USD5.67 
  • A25 off-peak toll prices increased by 14% effective September 2019 after ADT surpassed the necessary threshold 
  • Rolling 12-month peak direction traffic of 3,131 vehicles per hour on the A25

 

Chief Executive Officer Scott Charlton highlighted Transurban’s successful project delivery effort over the past 18 months, with five major projects completed and a further two expected to reach completion in mid-2020.

Transurban, along with its construction partners, has made substantial progress in delivering its project pipeline with the 395 Express Lanes in the US most recently opening in November.

Mr. Charlton said that alongside project delivery, Transurban had been investing in organisational capability and enhancing the customer experience leaving it well-positioned for emerging opportunities.

 

Financials

The company currently offers an annual dividend yield of 4.16%. The company has a P/E ratio of 181.0. The EPS stands at $0.081. The stock has a market cap of $40.1 billion and a Share volume of 2.74 billion. The stock has a 52-week price range of $12.43-$16.44 (Data Source – Company Reports).

 

Veye’s Take

Transurban has delivered a statutory profit of $162 million. It had an average daily traffic growth of 2.3 percent and a proportional toll revenue increase of 8.6 percent to $1,396 million. The company’s proportional earnings before interest, tax, depreciation, and amortisation (EBITDA) growth of 9.5 percent to $1,094 million excluding significant items, and distribution of 31.0 cents per security for the period. Compared to the corresponding period, Toll's revenue increased 10.0 percent from $1,298 million to $1,428 million. Population growth is putting demands on cities across the world and, for many, traffic congestion is impacting living standards and productivity.  Transurban delivered successfully over the past 18 months, with five major projects completed and a further two expected to reach completion in mid-2020. The company had been investing in organisational capability and enhancing the customer experience leaving it well-positioned for emerging opportunities. The company’s earnings have grown significantly by 34% per year over the past 5 years. TCL’S dividends per share have been stable in the past 10 years. Its dividend payments have increased over the past 10 years. The stock has strong support at $14.23. Veye recommends a "Buy" on “Transurban Group” at the current price of $14.43


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