Atlas Arteria

ALX Details

Update on Toll Revenue and Traffic Statistics: Atlas Arteria (ASX: ALX) is engaged in operating and developing toll roads. The company is present in four segments namely APRR toll (France), ADELAC (France), Dulles Greenway (The US), Warnow Tunnel (Germany). On 21 April 2021, the company has updated the market regarding the revenues from Toll and Traffic statistics in Q1 2021. The company has reported a decline in average weighted toll revenues by 9.0% YoY in Q1 2021 and a decline of 12.4% YoY in the weighted average traffic. The company has posted a decline in revenues from all the four business segments in Q12021. Due to imposition of government restrictions, a decline in traffic and consequently in toll revenues have been witnessed. Despite curfews and lockdown in several regions in North and South France, heavy vehicle traffic has witnessed an increase of 2.3% YoY in Q12021. The light vehicle traffic in Q12021 has witnessed a decline of 12.8% YoY.

Traffic and Toll Revenue Statistics (Source: Company Reports)

FY20 Financial Highlights: The company has registered a decline in its revenue from operations to $106.65mn in FY20 as compared with $175.19mn in FY19. The company has registered a loss in FY20 to $55.80mn. The company has reported an increase in its total non-current assets to $4.95bn in FY20 as compared with $4.08bn in FY19.

Key Risks: The company has witnessed a decline in toll revenues and traffic in Q12021, due to pandemic situation. The company is exposed to Covid-19 risk as there may be travel restrictions which may impact the financials of the company. The company requires liquidity to carry out its business or to pay off its short-term loans. Any shortage of liquidity for such purpose may lead to financial losses for the company.

Outlook: Looking forward, ALX will remain focus on creating long-term value creation for its investors by exploring potential opportunities in 2021. The company will focus on optimising and restructuring of its existing operations to achieve business growth. 

Valuation Methodology: Price/Cash Flow Per Share based Relative Valuation Method (Illustrative)

Data Source: Refinitiv, Thomson Reuters, 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: In the last one month, ALX has increased by ~1.87% and decreased by ~4.92% in the last three months. The current market capitalisation of ALX stands at $5.72bn as of 21 April 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$5.39-~$7.09. On the technical analysis front, the stock has a support level of ~$5.81 and a resistance of ~$6.14. We have valued the stock using a Price/Cash Flow multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some premium as compared to its peer average, considering the company increase in net assets and an increase in traffic for heavy motor vehicles in Q12021. For this purpose, we have taken peers Qube Holdings Ltd (ASX: QUB), Sydney Airport Holdings Pty Ltd (ASX: SYD), Transurban Group (ASX: TCL). Considering robust liquidity position at Dulles Greenway project as on 31 December 2020, creating long-term capital structure, positive outlook, lifting of restrictions for roads, valuation, and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $5.990, up by 0.335% as on 21 April 2021.

ALX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: 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.

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