Atlas Arteria Limited

ALX Details

Recent Updates: Atlas Arteria Limited (ASX: ALX) owns, develops, and operates a portfolio of toll roads in Germany, France, and the United States. The assets include Autoroute des deux lacs (ADELAC), a concessionaire, Dulles Greenway, and Warnow Tunnel, toll roads, and Autoroutes Paris-Rhin-Rhone (APRR), a motorway network.

Increase in Tolls: Recently, ALX notified regarding the increase in the tolls on the AREA and APRR motorway networks by 2.06% and 2.05%, respectively, effectively from 1 February 2022 as per the terms of the concession contracts.

Search for Successor: On 17 January 2022, ALX reported that Ms. Nadine Lennie, the current CFO, is leaving the company for better prospects. However, she will continue as the CFO till the close of Q1FY22. ALX has roped in an international recruitment firm to appoint a new CFO.

Growth in Traffic Across Portfolio in Q4FY21 (Ended 31 December 2021):

• ALX recorded the highest Q4 traffic performance during the December 2021 quarter for the APRR network, up by ~36.1% YoY. The light vehicle traffic performance stood robust, an increase of 44.8% YoY.
• The traffic at ADELAC was reported to be ~41.7% up on pcp during Q4FY21.
• The traffic at the Dulles Greenway in the US (Northern Virginia) improved further with the slow return of commuters and the overall rise in mobility in the region during FY21. The traffic increased by 25.5% YoY in Q4FY21.
• The toll revenue at Warnow Tunnel increased by 5.9% YoY in Q4FY21 though the traffic rose by only 3% YoY due to higher toll prices in 2021.

Toll Revenue Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of COVID-19 travel restrictions, regulatory issues, and financial risks such as liquidity crunch on smooth running of operations.

Outlook:ALX plans to declare the FY21 financial results ended 31 December 2021 on 24 February 2022. The company has a strong focus on cash flows and balance sheet restructuring to remain flexible to fund growth opportunities and maintain appropriate gearing. It is focused on investing and implementing on capital projects such as roadway improvements to enhance customer experiences and safety.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of ALX gave a positive return of ~10.56% in the past three months and a positive return of ~13.33% in the past nine months. The stock is currently trading above the 52-weeks’ average price level band of $5.390 - $7.065. The stock of ALX has a support level of ~$6.150 and a resistance level of ~$8.000. The stock has been valued using the P/E-multiple-based illustrative relative valuation method and arrived at a target price with a correction of a high single-digit (in % terms). The company might trade at a slight premium than its peers’ median P/E multiple, considering the growth in traffic across segments and increase in toll revenue from APRR & ADELAC in Q4FY21. For this purpose of valuation, a few peers like Aurizon Holdings Ltd (ASX: AZJ), Lindsay Australia Limited (ASX: LAU), Dalrymple Bay Infrastructure Ltd (ASX: DBI) have been considered. Considering the current trading levels, decent returns in the past months, and indicative downside in valuation, we suggest investor to book profit and give a ‘Sell’ rating on the stock at the closing market price of $6.800, up by 0.147% as of 3 February 2022.

ALX Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.