Macquarie Atlas Roads Limited (ASX: MQA) reported a decent increase in its weighted average toll revenue by 3.3% during the march quarter, against the same period last year, driven by higher traffic levels as well as revised toll schedules which has been executed from the last one year. The weighted average traffic for the period also rose by 2%, contributed by the improving traffic volumes at the APRR network.
Autoroutes Paris-Rhin-Rhône (APRR)
The traffic (total vehicles kilometers travelled) improved at APRR by 1.8% while the toll revenue rose 2.5% during the March quarter, as compared to the corresponding period in prior year. Heavy good vehicles traffic rose by 1.9%, driven by the recovering economy in France, while the light vehicles traffic surged 1.8% on the back of improved winter vacation traffic as well as less weather related hurdles.
Traffic growth (Source: Company Reports)
Meanwhile, APRR has established a strong liquidity position as well as was successful enough to improve its ratings from BBB- to BBB+ with a stable outlook from S&P as well as Fitch. Over €2.4 billion of debt was issued at 2014 at effective rates in the range of 0.769% to 2.25% with maturities ending at 2019 to 2025. Also, over €4.8 million of fixed debt with an average cost of 5.4% was issued having maturities in the range of 2015 to 2019. MQA intends to decrease its APRR financing costs in the coming years.
APRR Debt Maturity profiles (Source: Company Reports)
Dulles Greenway
The average daily traffic rose 3.4% in the March quarter, driven by the increase in traffic volumes due to corridor growth and less weather disruptions on the back of mild winter, as compared to the previous year’s corresponding period. The average workday traffic and non-workday traffic improved by 4.1% and 0.8% respectively, as compared to the March quarter in 2014. The average toll revenue surged 7.2% in the quarter, due to increase in toll rates, since last year’s April to March 4
th, 2015. Post that, the off peak toll rates further increased to $4.3 from $4.2, while the peak car tolls improved to $5.2 from $5.1.
Dulles Greenway Corridor (Source: Company Reports)
Chicago Skyway
The average daily traffic rose 4.6% in the March quarter a Chicago Skyway, as compared to the same quarter in earlier year. The light vehicle traffic which comprised over 89% of the entire traffic at skyway rose 5.2%, driven by mild winter season. As a result the daily toll revenue surged 19% driven by toll increase as well as traffic growth. The light vehicles tolls rose to US$ 4.4 from US$ 4 while the off peak tolls for heavy vehicles surged US$3.6 per axle.
Warnow Tunnel
The average daily traffic at Warnow tunnel rose 1.8% during the March quarter as the tunnel usage was increased on the back of better winter conditions, against the corresponding period in last year. The tariff increases since the last one year drove the toll revenues by 3.9% as compared to the March quarter in 2014.
Performance Fee
MQA did not earn any performance fee for the twelve months ended on June 30, 2015, due to inferior performance by the group as compared to the benchmark. Despite not earning any fee during this period, the company got a second installment performance fee for the year 2014. The group outperformed by 48.4% during the period July 1
st, 2013 to June 30, 2015, due to which the group will receive $19.4 million. According to the agreement between MFA and MQA, the performance fee installment will be used for fresh MQA securities. The weighted average price of MQA for ten trading days prior to June 30
th, 2015 was $3.262724, and therefore the total of 5,946,098 securities will be issued.
Outlook
Macquarie Atlas Roads rallied over 251% since its IPO on January 2010 and delivered over $1.6 billion to investors. Meanwhile the stock has been consolidating over the last twelve months, slightly falling by 0.9%. However, the shares of MQA generated a modest returns of 3.9% in the last six months and delivered year to date returns of 0.94%. The increasing toll fee coupled with rising traffic and recovering economic outlook is expected to drive the shares of MQA higher in the coming months. With the stock correcting over 2.7% in the last three months, we believe that investors can now enter into the shares of MQA.
Accordingly, we recommend a “BUY” on Macquarie Atlas Roads at the current price of $3.23.
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