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Reported solid profit growth: Macquarie Atlas Roads Limited (ASX:MQA) reported a solid statutory profit of $40.3 million for the first half of 2015, as compared to the earlier corresponding period loss of $67.9 million, driven by the better Europe economic conditions. Rise in toll fee also drove the US portfolio. MQA’s like-for-like portfolio basis proportionate earnings before interest, tax, depreciation and amortization from road assets rose by 8.4% yoy to $261.5 million and revenues increased by 3.4% to $347 million. Traffic volumes rose 2.3% yoy during the period driven by APRR and Dulles Greenway. The group finished ITR exit and witnessed net receipts of $12.4 million. Meanwhile, the firm reported an unfranked interim dividend of 6 cents for the period, which is a rise of 20 % against pcp. MQA estimates a dividends of 10 cents per share for the second half of 2015, and accordingly an 18 cents per security during the full year of 2016. The group had a working capital of $68.8 million during the first half of 2015.
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Macquarie Atlas Roads portfolio (Source: Company Reports)
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Growing APRR Traffic: APRR traffic improved by 2.2% yoy during the first half of 2015, against pcp, with light vehicles traffic increasing by 2.3% yoy while heavy vehicles soaring by 2% yoy. Light vehicles accounted 84% of the traffic and 63% of the revenues in the first half of 2015. Heavy vehicles comprised 16% of the traffic and 34% of the revenues during the period. The segment’s revenues increased 2.7% yoy while EBITDA improved 8.3% on a year over year basis. Accordingly the EBITDA margin enhanced to 74.9% during 1H15, from 70.7% in 2014 and 70.3% in 2013. Meanwhile, the group has been decreasing its operating expenses for the segment from 2006. Headcount (FTE) reduced to 3,502 in 1H15, from 3,534 in 2014. The group signed for €275 million loan facility with European Investment Bank (EIB) during June. Meanwhile, both S&P and Fitch gave a BBB+ rating with a stable outlook for APRR. Entire APRR profit is distributed to Eiffarie to pay the debts. Over €3.5 billion was spent on APRR since 2006 to maintain the network.
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APRR performance associated with France economic growth (Source: Company Reports)
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Increase in toll drove Dulles Greenway Performance: Dulles Greenway’s improved its traffic by 4.3% yoy during the first half of 2015, against pcp, and accordingly the revenues increased by 7.3% yoy while EBITDA also rose by 7.3% yoy. EBITDA rose to USD 32 million in the first half of 2015, as compared to USD 29.8 million in the first half of 2014. Dulles Greenway has two major competitors- Route 7 and Waxpool road. These roads got decent capacity upgrades from 2005, leading to a major traffic diversion from Dulles Greenway. However, the group estimates a decrease in its competitors’ service levels as the corridor develops.
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Dulles Greenway started showing signs of growth driven by better traffic (Source: Company Reports)
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Other highlights: The group’s Chicago skyway traffic marginally rose by 0.4% yoy, while the average daily toll revenues surged by 14.9% yoy to US$ 235,712 driven by the toll increases. Accordingly, the EBITDA improved by 14.5% yoy to US$37.3 million during the period. Warnow tunnel traffic also surged by 2.8% on a year over year basis, and average daily toll revenues were enhanced by 5% yoy to €25,612. EBITDA rose by 0.3% yoy to €3.1 million in the first half of 2015.
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First half performance highlights (Source: Company Reports)
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Stock Performance: The shares of Macquarie Atlas Roads have been performing well during the year, delivering a year to date returns of 7.2% (till Sep. 4), as compared to the broader index S&P/ASX 200 decline of 6.8% during the same period. Even though the broader index S&P/ASX 200 fell more than 11% in last four weeks (as of Sep 4) due to china slowdown, the stock has been stable during the month. We believe that the rise in toll fee would continue to drive its US portfolio in the coming months. Dulles Greenway’s performance started improving due to enhancing population growth in the corridor. Moreover, improving economic conditions in France is expected to boost its APRR performance further. Meanwhile, Macquarie Atlas Roads also has a decent dividend yield of 3.6%. We maintain our positive stance on the stock given its growth potential, and accordingly give a “BUY” recommendation on the stock at the current price of $3.41.
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