Transurban Group

Recent Update March Quarter Information: Transurban Group (ASX: TCL) is an integrated transport company, engaged in the development, operation, maintenance and financing of toll road, and management of the associated customer and the government relationship. The company updated on 10 May 2019 that Transurban Finance Company Pty Limited, its financing vehicle, has priced €600 million of senior secured 10-year notes under its ‘Euro Medium Term Note Programme’ with maturity date in May 2029.The received amount will be exchanged in Australian currency at a fixed interest rate.

The company recently released its March Quarter 2019 Update mentioning that ADT (Average Daily Traffic) rose by 2.3%, primarily driven by all the segments.ADT for Sydney went up by 2.1% to 813,000 trips. ADT for Melbourne grew by 3.1% to 856,000 transactions and North America ADT improved by 2.9% to 136,000 trips.

Financial Performance in 1H FY19:Analysing the statutory results, toll revenue witnessed a strong growth of 14.7% from $1,131 million to $1,298 million. Profit after tax for the company saw a decline of 56.1% from $331 million to $145 million. EBITDA grew 14.2% to $971 million in 1H FY19 from $850 million in the previous quarter last year.

Considering the proportional results, ADT witnessed a growth of 2.7%. Its toll revenue growth was 9.3% to $1,286 million, largely supported by North America and Sydney performance posting a toll revenue growth of 12.6% and 7.7% respectively. EBITDA came in at $693 million, decreased by ~24%. The management believes that proportional EBITDA indicates the asset performance in best manner.

To compare the performance of current business with result of prior year, we analysed 1H FY19 numbers after adjusting to exclude certain acquisitions and new assets. EBITDA excluding significant items rose by 9.8% to $1,001 million.

Proportional Results (Source: Company Reports)

The free cash for the company in 1H FY19 recorded a growth of 23%. Gearing ratio for the company came in at 35.8% on December 31, 2018 from 35.2% on 30 June 2018.

Progressive Cash Flow from Nine Projects in Next Five Years:The company currently has 9 projects which are due to be completed in next 5 years and are expected to contribute to ongoing distribution growth. Out of this, 5 projects are likely to reach completion in next 2 years. Average concession life is likely to remain close to thirty years over next five years. The management expects 85% of WestConnex construction to be completed within 2 years.


Project Pipeline (Source: Company Reports)

What to Expect:The company has reaffirmed its distribution guidance for FY19 at 59.0 cps. The management kept the mid-single digit distribution percentage growth for FY20 unchanged. The company expects 5 projects to be completed by FY21 and another 4 by FY24, providing support to the ongoing distribution growth. The company has been focusing on delivering committed projects, maximizing performance of operations with enhancing customer and community offerings.

Stock Recommendation: At current market price of $13.580, the stock is trading at price to earnings multiple of $113.900x. The company’s annual dividend yield stands at 4.24% with market capitalization of $35.96 billion.
The historical price movement suggests that the stock has gained 13.40% in last 1-year and 17.38% in last 6 months.The stock is trading at a forward EV/EBITDA multiple of 24.2x which is higher than the peer median of 22.1x.
Considering the valuations and fundamentals, we give a “Hold” recommendation on the stock at the current market price of $13.580 per share (up 1.042% on May 10, 2019), and this price is closer to the 52-weeks' high level of $13.75.
 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.