The Transurban SP seems to have been hit by the ACCC stopping them buying EastLink.

I think the SP drop is an over reaction. So I think it will head up again in the short / medium term,

I also note that most of the Transurban tolling concessions have built in CPI protections and well as a minimum floor rate (from memory i think CityLink was around 4%). And demand continues to grow for the use of their tollroads.

I am a bit confused what Transurban does from here. There are a few Australian tollroads comiung up that they could try to bid/buy. But I think they will have to look elsewhere. They used to have a large USA focus. I used to know Ken Daley that ran it. But he left years ago. And I don't seem to hear much what their future plans are.

I know that Scott Charlton (the ex CEO) really focused on maximising the all parts of their current assest. So it will be interesting to see what they new CEO will do.

Anyone have any thoughts on Transurban?

Cheers

Parko

Dividend payouts are continuing their upward trajectory again after crashing 50% from 2019 into 2020 thanks to the pandemic. A payout of $0.26 is still below 2019 numbers but is showing that traffic is normalising after a hectic couple of years.

Transurban has the ability to pass on price rises onto their tolls given their prices are tied to inflation which in my opinion makes them a solid investment in a high inflationary environment like the one we are currently experiencing.

MORGANS - PT $14.82 Morgans upgrades its rating to Add from Hold after adjusting its valuation approach to concession-based assets, which also lifts its target price to $14.82 from $13.99.

TCL has announced this morning that it has won the bid for the rump of WestConnex that it does not own. Originally the NSW government was set to auction off two tranches of the motorway in equal portions, but it seems that they have decided that with such a dominant position, TCL might as well buy the whole kit and kaboodle. The details of the deal have been announced and the TCL consortium is paying around $11.1bn for the 49% it does not own.

• TCL will raise $4.22bn of new equity, including $3.97bn through a fully underwritten, 1 for 9 Entitlement Offer to eligible security holders at an offer price of $13.00 (Offer Price) per security. The Offer Price represents an 8.3% discount to Transurban’s closing price of $14.18 on 17 September 2021, and a 7.5% discount to TERP of $14.06.
• TCL will also raise $250m through a placement to AustralianSuper. The deal is through the consortium Sydney Transport Partners and now includes a new partner Caisse de dépôt et
  placement du Québec (CDPQ). The Canadians love our infrastructure assets.
• WestConnex has close to 40 years concession life remaining. The additional ownership in WestConnex, including the extension to the M5 West concession from 2026, extends Transurban’s weighted average concession life to approximately 30 years.

Transurban Group (ASX:TCL). A True Defensive Stock 2021? 

Transurban as one of the world’s largest toll road operators owns and manage a network of 21 toll roads globally with vehicles making over 2million daily trips. So we take a look to see if Transurban Group is a True Defensive Stock

Transurban Shares Price

The share price of ASX:TCL, has been quite stable over the 5 year period, returning investors 21% over that timeframe. You can, of course, see the effects of the COVID19 pandemic on the share price at the start of 2020 and for anyone who managed to buy Transurban Stock at under $11 you’ve made a great decision here.

The share price is currently sitting at $14.29, which is towards the upper segment of the 52-week range is 12.36 – 15.635.

Dividend History

Whilst some may scoff at the 21% return over the previous 5 years, it’s worth remembering that Transurban has a stable dividend policy and at the current price pays a dividend yield of ~2.9%. In FY2021 the company paid a distribution of 36.5 cents per stapled share, of which 1.0 cents was fully franked.

Transurban Shares also have a DRP (dividend redistribution plan)

Transurban (ASX:TCL) has been growing its dividend almost every year since 2009, with the exception of TCL cutting their dividend in FY2020 due to the uncertainty around the COVID19 pandemic. We expect that TCL will continue to raise their dividend into FY21 and FY22. For a dividend investor, this may be an indication of being a defensive stock!

Financials

Transurban is set to report their FY2021 Full-year results on Monday, 9 August 2021, so we will be very keen to tune into this presentation to see how metrics are tracking but for the time being, we will look at the current Financials.

Income Statement Overview

From the HY21 market update provided for the Half Year ended 31st December 2020, we can see there have been a few issues with TCL, with revenues down 21.9% to $1.4billion. However, you can see that losses have ballooned out to be increased a massive 729.9% to be a loss of $385million.

Whilst Transurban assures in the report that this is temporary, we will be keen to investigate these numbers further when the group releases their FY21 report in August to see if metrics are improving.

The company attribute these lower figures largely as a result of the COVID pandemic. However, mention in the presentation that Traffic impacts as a result of COVID-19 across all markets, with Melbourne and Greater Washington Area most affected; traffic volumes improved at the Group level throughout the period.

The Westgate Tunnel Project

Transurban is contributing funding towards the construction of the Westgate Tunnell project. The company as of December 2017 had contributed as much as $4 billion towards the $6.7billion project. However, the Project has been plagued with a number of issues relating to latent conditions which have been uncovered during the construction of the project.

On the 29th of January, the builder constructing the Westgate Tunnel Project for Transurban issued a letter of Force Majure, effectively trying to terminate the contract due to significant quantities of PFAS that was located during the excavation of the tunnel. Transurban does not consider the contract terminated and it seems the contractor has re-commenced critical works as outlined in future market updates by TCL. This is however a project which should be monitored by investors for cost escalations on the already massive project.

The Westgate Tunnel is located in Melbourne and has an effective concession once constructed till 2045.

Prophet’s Take And Should I Buy Transurban?

Prophet really likes Transurban as a large dividend-paying machine. They also have a broad range of global toll roads that they operate and have been resilient in paying these dividends even during the fallout of the COVID19 pandemic. We believe TCL is a true defensive stock and is typically seen as a bond proxy by many investors.

Full Analysis

Adding Transurban to long term watchlist. Will be interesting to see how Covid impacts long term working from home arrangements and hence toll road usage

11 February 2020

TRANSURBAN 1H20 RESULTS

1H20 highlights:

• Average daily traffic (ADT) grew by 2.3%
• Proportional toll revenue increased by 8.6% to $1,396 million
• Proportional earnings before interest, tax, depreciation and amortisation (EBITDA) and before significant items increased by 9.5% to $1,094 million
• FY20 distribution guidance reaffirmed at 62.0 cents per security (cps)
• 1H20 distribution of 31.0 cps, fully covered by free cash flow $927million
• Statutory profit of $162 million
• Underlying cost growth of 2.0% reflecting cost discipline and recent investments providing scale benefits
• 381,000 hours average workday travel-time savings from July to December 2019
• Substantial progress to supply up to 80% of electricity needs for Brisbane and Sydney operations from renewable sources
• Road Injury Crash Index tracking at 3.90 for 1H20, the lowest score since we introduced the RICI in FY14 with Transurban roads up to 68% safer than alternatives
• The West Gate Tunnel Project D&C contractor has purported to terminate the D&C subcontract and also noted their intention to continue works on the site. Transurban does not consider the D&C subcontract has been validly terminated and, as such, the contract remains valid

14 January 2020

APPOINTMENT OF NON-EXECUTIVE DIRECTOR

Transurban announces that Mr Terence (Terry) Bowen will join the Transurban Board as a Non-executive Director, effective 1 February 2020.

Mr Bowen has extensive financial, strategicand operational experience across a range of sectors within some of Australia’s leading companies. He served as an Executive Director and Finance Director of Wesfarmers Limited from 2009 to 2017. Prior tothisMr Bowen held various senior executive roles within Wesfarmers, including as Finance Director of Coles, Managing Director of Wesfarmers Industrial and Safety, and Finance Director of Wesfarmers Landmark. Mr Bowen also served as the inaugural Chief Financial Officer of Jetstar Airways (2003 to 2005), and before this held senior finance roles with Tubemakers of Australia Limited.

Mr Bowen is currently a Managing Partner and Head of the Operations Group at BGH Capital and a Non-executive Director of Navitas Pty Ltd. Upon joining the Transurban Board, Mr Bowen intends to transition to a part-time role at BGH Capital as Partner and Chair of the Operations Group.

Mr Bowen is a Non-executive Director of BHP Group Limited, BHP Group plc and the West Coast Eagles. He is a former Chairman of the West Australian Opera Company Incorporated and a former Non-Executive Director of the Western Australian Institute of Medical Research Pty Ltd, Gresham Partners Holding Limited and Gresham Partners Group Limited.He is a Fellow of CPA Australia and a Member of the AICD

8 November 2019

FINANCIAL CLOSE OF TRANSURBAN’S A$1,650 MILLION SYNDICATED BANK FACILITY

Transurban announces that Transurban Finance Company Pty Limited, the Transurban Group’s financing vehicle, has successfully refinanced its existing A$1,650 million corporate syndicated bank debt facilty. The new facility comprises two tranches of A$825 million with tenors of 3 and 5 years respectively.

The transaction refinanced the existing facility well in advance of its maturity, with the new facility continuing to be used to fund the ongoing construction of West Gate Tunnel as well as for general corporate purposes.

Transurban CFO Adam Watson said of the transaction: “The syndicated bank facility is one of the key funding sources supporting the delivery of Transurban’s development pipeline, including the West Gate Tunnel project. We appreciate the support received from our relationship banks to refinance the facility on favourable terms.”

10 October 2019

SEPTEMBER QUARTER 2019 UPDATE

Transurban today released its September quarter 2019 update. During the period, Average Daily Traffic (ADT) increased by 1.8%, with growth achieved across all markets.

The benefits of Transurban’s development activities were demonstrated during the quarter, with an additional one million trips generated in Queensland, following the completion of three major projects in the twelve months to August 2019. Development activities across Transurban’s markets continue to progress, with three additional projects on track to open by the end of 2020.

Highlights for the period included:

Sydney

The NorthConnex project remains on track for opening in mid -2020, with paving now complete and mechanical and electrical works underway.

The WestConnex project is also progressing well, with paving complete on the New M5 ahead of the expected opening next year. Tunnelling on the M4-M5 Link has commenced with 12 road headers in operation. As part of the program of community initiatives for the WestConnex project, Ismay Reserve was opened during the period, providing local residents with a fully refurbished 2.5 hectare park.

...

Melbourne

Major construction activity on the West Gate Tunnel Project is progressing with preparation works to add new lanes to the West Gate Freeway continuing, and piling works to construct the second river crossing and new motorway connection to CityLink underway.

...

Brisbane

The completion of a significant construction program in Brisbane drove traffic growth in a number of areas across the network. The Logan Motorway benefited from the completion of the Logan Enhancement Project in August 2019, with all lanes and ramps now open to traffic. Motorists on the Logan Motorway are saving up to 20 minutes during peak periods , with average workday traffic for the month of September up 3.9% year on year. The Gateway Motorway has also seen stronger traffic growth following the completion of the Gateway Upgrade North project in January 2019 with average workday traffic for the month of September up 4.2% year on year. The completion of the project has resulted in some diversion of traffic away from Clem7 and Airportlink M7. Legacy Way has continued its strong year on year traffic growth following the completion of the Inner City Bypass upgrade project in August 2018.

...

North America

In the Greater Washington Area, work on the 395 Express Lanes project is nearing completion, with the opening scheduled for November 2019. The 13 kilometre  extension of the 95 Express Lanes north to the Washington DC border provides customers with direct access to major employment centres at the Pentagon, Amazon’s second headquarters and Washington DC. Construction act ivities are also underway on the 95 Express Lanes Fredericksburg extension after achieving financial close in July 2019.

...

In Montreal, growth in off -peak trips (including weekends) has been strong, with traffic on the A25 continuing to exceed the investment case.

...

Some of the most picturesque scenery in the world can be witnessed cruising the Rhine River in Germany, spotting the castles which adorn its banks and cliffs at regular intervals.

Many of these castles were built by ‘robber barons’ - petty rulers whose minions would hold river commerce for ransom by means of chains and towers until an appropriate toll was paid.

Transurban Group is the preeminent ‘robber baron’ of our fossil-fuelled times.  Whilst modern toll roads, bridges, and tunnels lack much of the charm of the Rhine Valley their profit potential remains intact.  That ‘beep’ in your car on your morning commute which eats away at the margins of the fruits of your human capital on a daily basis is actually the sound of Transurban’s opportunity.  We’ll continue purchasing their services however, they are selling us more personal time and providing small relief from the traffic in our congested cities.  Or I could just be building castles in the air.

I have dug up an interesting article from the 30th of April 2019.

"Bitumen-as-a-service generates 850TB of data a year.

The days of e-tags fixed to windscreens bleeping at drivers as they pass motorway toll collection points are officially numbered.

Major road builder Transurban – think Sydney’s WestConnex and NorthConnex – on Monday revealed that it’s now working to replace the endemic and sometimes incompatible systems with digital video-based number plate recognition as part of a sweeping tech overhaul.

The smart tolling foray is just one of a swag of new digital traffic initiatives revealed by the ASX-listed infrastructure company on Monday as it revved-up its big picture vision for how the roads it builds and operates will tie into emerging transport technologies ranging from autonomous vehicles to robotic traffic cones.

..."

Full text can be found here:

https://www.itnews.com.au/news/transurban-sends-bleeping-toll-road-etags-to-the-scrap-heap-524407

Not exactly a Bull case...

TCL’s massive capital raising to purchase part of West Connex in Sydney has weakened the share price. The retail entitlement came up short and has mopped up most buyer demand at both retail and institutional levels. At $10.80 for the SPP, today’s price of around $11.10 is starting to get perilously close.

The overhang from the capital raising is likely to keep the price weak in the near term. However, the expansion of TCL into this near monopoly market in Sydney is likely to give it earnings tailwinds for the years to come, once West Connex  comes online.

Debt remains at significant levels and hence it has interest rate vulnerability. Meanwhile the RBA is seeing no need to raise interest rates for the foreseeable future, so that risk is somewhat mitigated for now.

TCL is likely to have low volatility going forward with a steady-as-she-goes share price. In this sense it will act more like an ETF in its price movements with slow share price growth and a stable dividend. An unexciting stock but one that should deliver good returns over time when the dividend is included. Total returns of 7-8% pa (including 5% dividends) are the expectation over coming years. Hardly exciting, but not bad.

Rights Issue – WestConnex Acquisition

It is amazing how quickly some companies can raise capital.  The Robber Baron (refer to #Bull Case) Transurban Group (in conjunction with an Australian superannuation fund and a Canadian pension fund) is acquiring a controlling stake in WestConnex for $9.3 billion from the NSW Government.  Think of WestConnex as a gilded hamster wheel available for the use of those engaged in the rat-race in Western Sydney.  Transurban has looked to its existing share registry to raise the majority of capital necessary for this purchase.

Since the 31st of August 2018 Transurban has already raised most of the $4.2 billion it had earmarked to come from its institutional shareholders, with an approximately 1 share in 6 offer at $10.80 per share [1].  This represents a 10% discount from Transurban’s recent average price and is also below Strawman’s forecast of fair value [NB this forecast was created some months ago and does not necessarily factor in the WestConnex acquisition].

In the hopes of raising some further $4 billion this same discount is now available to retail shareholders but for a limited time only! [2]