Is the Transurban (ASX: TCL) share price a buy after providing another traffic update?
What is Transurban?
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.
Transurban’s update
Transurban said that COVID-19 traffic impacts were observable from early March with traffic deteriorating then improving in the second half of April.
Looking at the weekly numbers, traffic numbers were down 48% in 29 March week. Including the impacts of Easter 2020, traffic was down 56% and 57% respectively in the 5 April and 12 April weeks respectively. Including the benefit against Easter 2019, traffic was down 30% in the 19 April week.
The 26 April week showed a fall of 44%. So compare that to the other non-Easter-affected week of 29 March which saw a decline of 48% – traffic has stabilised and perhaps improved.
Large vehicle traffic data showed a 16% decline in the 26 April week.
Transurban said that traffic will remain sensitive to future government responses, however commercial traffic continues to display greater resilience to date.
It’s continuing to work with contractors and governments to deliver its portfolio of large, complex projects and keeping thousands of people in jobs and supporting the supply chain.
Is Transurban a buy?
I’ve never really liked Transurban as a great buy. It did generate solid cashflow, but its valuation always seemed expensive to me. Something that wouldn’t be that defensive in a downturn and there are alternatives that people can use for free.
If more people work at home then it could permanently impact the future earnings. I’d rather buy these technology shares:
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
