Is the Transurban Group (ASX: TCL) share price a buy after announcing its September 2019 quarter update.
Transurban owns and operates 15 toll roads in Melbourne, Sydney, and the greater Washington area. Revenue growth is derived from traffic growth and their very own rivers of gold – inflation protected toll prices. CityLink in Melbourne is Transurban’s biggest asset, in 2018 this accounted for approximately 32% of their total toll revenue – working out to be about twice the size of the roads in Brisbane.
Is The Transurban Share Price A Buy After its September 2019 Update?
During the September 2019 quarter, average daily traffic (ADT) increased by 1.8% with growth in all markets.
Transurban said that benefits of its development activities were demonstrated during the quarter with an additional one million trips generated in Queensland after the completion of three major projects in the year to August 2019. Three more major projects are expected to open by the end of 2020.
Sydney
Over the quarter, Sydney ADT increased by 2.1% to 838,000 trips. Car traffic increased by 2.8% and large vehicle traffic decreased by 4.5% due to weaker economic conditions.
The NorthConnex project remains on track for opening in mid-2020 with paving complete and mechanical & electrical works underway. The WestConnex project is progressing with paving complete on the new M5 ahead of the expected opening next year.
Melbourne
Over the quarter, Melbourne ADT increased by 0.6% to 860,000 transactions. Car traffic decreased by 0.1% and large vehicle traffic increased by 3.8%.
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
Over the quarter, Brisbane ADT increased by 2.7% to 425,000 trips. Car traffic grew by 2.7% and large vehicle traffic increased by 2.8%.
The Logan Enhancement Project was completed in August 2019 with all lanes and ramps now open to traffic.
Transurban also announced that the Toowoomba Bypass opened to traffic on 8 September 2019. Transurban is providing tolling services on this asset, it’s the first time that Transurban has provided ‘Tolling as a Service’ to a third party.
North America
Over the quarter, North America ADT increased by 4.5% to 156,000 trips.
The average dynamic toll price increased by 11.5% to US9.37 on the 95 Express Lanes and increased 3% to US$5.52 on the 495 Express Lanes.
Work on the 395 Express Lanes project is nearing completion with the opening scheduled for November 2019.
Is The Transurban Share Price A Buy?
The Transurban share price is down slightly on the open. It’s at a pretty high valuation these days due to the lower valuation. If the 3.9% distribution yield is attractive to you, then Transurban probably wouldn’t be a terrible buy – but I don’t think toll revenue is as safe as some people think it would be in a downturn.
For reliable earnings and dividends I would much rather buy the shares revealed for free in the report below.
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