Atlas Arteria

ALX Details

Profit Booking:Atlas Arteria (ASX: ALX) invests in infrastructure assets in Organisation for Economic Co-operation and Development (OECD) and OECD equivalent countries, and non-infrastructure assets, ancillary to a major infrastructure investment with focus on toll road investments, both greenfield and mature.

3QFY19 Update: The company recently released an announcement, providing details on the toll revenue and traffic statistics for the quarter ended 30 September 2019. During the quarter, weighted average traffic went down by 0.6% on pcp basis. On nine months basis, weighted average traffic as at 30 September 2019 was 0.9% lower as compared to the prior corresponding period. Traffic performance reported in 2018 was unusually strong, driven by the French National Railway strikes. Traffic performance in Q3 2019 did not witness any such advantage and was also impacted by the adverse weather during the period. However, the report stated that the results were in-line with the company’s expectations.

During the quarter, weighted average toll revenue was higher than the prior corresponding quarter by 1.7%. On nine months basis, weighted average toll revenue went up by 1.4% in comparison to prior corresponding period on the back of higher toll prices and the traffic mix for the APRR business.

Business Highlights:
APRR: Under the APRR business, Heavy Vehicle Traffic (HVT) increased by 1.4% on pcp, demonstrating continued strength in the French economy and strong manufacturing performance in France. Light Vehicle Traffic (LVT) for the quarter went down by 0.8% in comparison to the prior corresponding quarter, reflecting the overhang from the French National Railway strikes in 2018 and adverse weather conditions in France. Revenue for the APRR business was 1.8% higher than the prior corresponding period, as a result of increased toll prices and continued growth in higher value HVT.

ADELAC:Performance of the ADELAC business was impacted by similar factors as APRR. Average Daily Traffic (ADT) went down by 1.7% as compared to the prior corresponding quarter and total revenue witnessed a marginal decline of 0.2%.

Dulles Greenway: The business reported continued progress in traffic performance, with traffic decreasing at a slower rate than H1 2019 traffic. Q3 traffic went down at a rate of 1.8% on prior corresponding quarter. Traffic was impacted by toll increase at the Dulles Toll Road, lane closures at the DTR mainline plaza, resulting in a significant peak hour congestion. Greenway revenue for the third quarter was higher than pcp by 0.9%.

Warnow Tunnel: Traffic in Q3 2019 increased at a rate of 3.0% as compared to Q3 2018, on the back of warmer than average summer weather in Northern Germany, leading to a strong summer tourist season. Toll revenue went up by 6.9% in comparison to prior corresponding quarter. For the nine months ended 30 September 2019, toll revenue was 7.7% higher than pcp with growth supported by higher traffic and toll increase.


Toll Revenue and Traffic Performance (Source: Company Reports)

Stock Recommendation: The stock of the company generated a YTD return of 37.91% and is currently trading close to the upper end of its 52-week trading range of $5.940 - $8.580. The stock has a market capitalisation of $5.69 billion. The company has an EV/Sales multiple of 48.5x, which is higher than the industry median of 16.5x. EV/EBITDA multiple of the company stands at 60.8x, which is higher than the industry median of 25.6x on TTM basis. Looking at the above scenario, it can be presumed that most of the positive developments have been discounted at the current levels. Hence, considering the stretched valuations and current trading levels, we recommend a “Sell” rating on the stock at the current market price of $8.420, up 1.08% on 23 October 2019 and advice investors to book profit at the current juncture.

 
 ALX Daily Technical Chart (Source: Thomson Reuters)

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