2 Infrastructure Stocks for long term benefits – BLD and TCL

Stocks’ Details
 

BORAL LIMITED (ASX: BLD)

Benefitting from market trends: Boral has been highlighted to benefit from the positive trend in the infrastructure sector. It has successfully priced US Private Placement (USPP) senior, unsecured note issue for US$300 million under two tranches, namely, US$225 million (8 years) of fixed rate notes and US$75 million (8 years) of floating rate notes. The settlement is expected to occur on 16 April 2018. This will be used in addition to existing cash for refinancing US$306 million of senior, unsecured notes maturing in April 2018. For its North America business, Headwaters acquisition is seen to be a catalyst for transformational growth and the group aims to address short-term operational issues in some businesses while intends to avail benefits from US corporate tax rate cuts. The group is now expected to benefit from a great backlog of repairs needed for US highways through its construction business. It also maintains a strong position as a key supplier to Australia’s booming infrastructure and strong residential and non-residential construction markets, with leading capabilities and operations. The half year FY18 result with EBITDA rise of 50% and statutory NPAT rise of 13% has been encouraging. BLD has flagged for high-single digit EBITDA growth and low double-digit EBIT growth in FY18, excluding property in both years for its Australia Business, while significantly higher EBITDA in FY18 reflecting Headwaters acquisition is expected for North America Business with Meridian Brick JV to report positive and improved earnings in 2H. USG Boral is expected to grow at mid-single digit rate in FY18. While the stock price slipped by 6.17% in last one month, BLD is regaining strength with 1.4% rise on April 13, 2018. We have a buy recommendation at the current price of $ 7.40.
 

Activity in Key Markets (Source: Company Reports)
 

TRANSURBAN GROUP (ASX: TCL)

Bagged multiple opportunities for growth: Transurban recently stated about inking an agreement with Macquarie Infrastructure Partners to acquire 100% of the equity interests in the A25 (7.2km toll road and bridge connecting Northern Montreal across the Rivière des Prairies to commercial and residential areas). The interests have been acquired for CAD 840 million along with acquisition costs of CAD 18 million. The acquisition is said to be immediately accretive to TCL’s distribution per security and gives the company access to one of North America’s most urbanised and heavily congested regions. Transurban has 62.5% interests in Transurban Queensland (TQ), which has successfully priced CHF 200 million of senior secured Swiss debt maturing December 2025 under its Euro Medium Term Note Programme. Transurban Queensland has also priced Inaugural USD Reg S Issuance. Meanwhile, Transurban has signed many agreements with the State to deliver the West Gate Tunnel Project and construction phase has commenced with completion due in 2022. At company level, Mr Mark Birrell is joining the Transurban Board as a Non-Executive Director, effective 1 May 2018. The group has also reached financial close on the 395 Express Lanes project and is assessing other opportunities across the North American market. We give a “Buy” on TCL at the current price of $ 11.180.

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