Transurban Group

TCL Details
 
Average Daily Traffic Increased by 1.8%: Transurban Group (ASX: TCL) owns and operates electronic toll roads and intelligent transport systems. Recently, the company reported that one of its subsidiaries, Hills M2 Motorway (Hills M2), has successfully raised $403 million of non-recourse debt via a new bank facility, comprising a tenor of 12 months.

Q1FY20 Operational Update for the Period ended 30 September 2019: TCL announced its quarterly operational updates, wherein, the company reported a 1.8% increase in Average Daily Traffic (ADT), with growth across all the markets. Within the Sydney segment, the business reported ADT at 838,000 trips, depicting an increase of 2.1% on y-o-y basis. Average workday traffic increased by 1.5% and average weekend/public holiday traffic increased by 2.8% on y-o-y basis. During the quarter, traffic due to the large vehicle was impacted by a general softening in economic conditions, driven by weaker household consumption and reduced construction activity. Across the Melbourne network, the company reported ADT at 860,000 transactions, up 0.6% on y-o-y basis while average workday traffic decreased by 0.2% on y-o-y basis. Overall traffic growth on CityLink was weaker during the quarter depicting the tapering of the ramp-up associated with the widening of Western Link. ADT of Brisbane and North America traffic stood at 425,000 trips and 156,000 trips, respectively, reflecting growth of 2.7% and 4.5% on y-o-y basis.


Q1FY20 ADT Growth (Source: Company Reports)

Guidance: FY20 distribution is expected at 62.0 cents, reflecting a growth of 5.1% on FY19 distribution. The business expects completion of three projects by the end of FY20.

Valuation Methodology: EV to Sales Multiple Approach

EV/Sales Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of TCL is quoting at $14.870 with a market capitalization of ~$40.8 billion. The stock has generated positive returns of 2.68% and 28.82% in the last three months and one year, respectively. At the current market price, the stock is quoting at the upper band of its 52-week trading range of $11.50 and $16.060. The business reported decent progress in its development activities with three additional projects on track to open by the end of 2020. Considering the aforesaid facts, we have valued the stock using one relative valuation method i.e. Enterprise Value to Sales (EV/Sales) multiple and arrived at a target price of higher single-digit upside in % terms. Looking at the current price movement, trading levels and business prospects, we recommend a ‘Hold’ rating on the stock at the current market price of $14.870, down 0.402% as on 06 January 2020.

 
TCL Daily Technical Chart (Source: Thomson Reuters)
 

Decmil Group Limited

DCG Details
 
Work in Hand at Record Level: Decmil Group Limited (ASX: DCG) operates as a diversified industrial service provider. On 06 January 2020, the company informed that Mitsubishi UFJ Financial Group, Inc. has reduced its holding from 7.44% to 6.14%.

FY19 Highlights for the Period ended 30 June 2019: DGC announced its FY19 full-year results, wherein the company reported revenue at $663.276 million, representing a robust growth of 89.9% on y-o-y  basis, aided by the inclusion of several new and larger contracts in CY2018 and CY2019 on account of improved conditions from the infrastructure sector. The company reported profit after tax at $14.018 million, up 328.7% on y-o-y basis. The company reported strong cash flow, generating $22 million of operating cashflow and $67 million of net cashflow during FY19. During the period, the business reported execution of projects for Fortescue in relation to its Port Hedland tug harbor and non-process infrastructure for Rio Tinto at its Amrun mine.DCG also posted extension and expansion of a project for BHP at its South Flank mine for the upgrade of the Mulla Mulla village. During the period, the business was awarded $63 million of new transport infrastructure projects across Western Australia and Queensland. For Q1FY20, the company reported that homeground occupancy has improved to ~25% on account of GLNG Train shutdown.


FY19 Financial Highlights (Source: Company Reports)

Outlook: The company expects FY20 revenue at ~$700 million. Work in hand of the business stands at a record level of ~$900 million, extending to FY22. 

Stock Recommendation: The stock of DCG is quoting at $0.56 with a market capitalization of ~$123.22 million. The stock has generated negative returns of 42.78% and 41.14% in the last three months and six-months, respectively. At the current market price, the stock is quoting at the lower band of its 52 weeks trading range of $0.415 to $1.00. Australia and New Zealand are witnessing a significant public sector infrastructure spend by State and Federal Government. In FY20, the company possesses major opportunities in Infrastructure across Australia and New Zealand. Considering the price movements, trading levels and decent outlook, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.560, up 8.738% as on 06 January 2020.
 
 
DCG Daily Technical Chart (Source: Thomson Reuters)

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