The Transurban Group (ASX: TCL) share price is being pushed higher after giving investors a presentation.
What was the presentation about?
It gave investors an overview about the current business, as well as an insight into trading conditions.
Transurban reminded investors that it’s a leading global toll road developer and operator, with 21 assets located in five markets with good structural growth drivers.
Its weighted average concession life is 29 years. That means it’s contracted to keep running roads like Melbourne’s Citylink for a long time.
The business tries to balance growth of distributions (dividends) with investment into new opportunities to drive long term value.
Transurban also has seven projects in development or delivery. Some of the opportunities include WestConnex in NSW, Logan Motorway widening in Queensland and the Maryland Express Lanes in the US.
What’s the bull case idea behind Transurban?
There are few a different themes that combine that could mean Transurban is a good business to consider.
Infrastructure is an important driver of economic stimulus globally. There’s a need for private sector investment due to the record government debt levels. Governments are increasingly favouring a development partner approach.
It may a solid idea for income as well over the next few years.
Recovery of group level average daily traffic (ADT)
Transurban showed that total traffic is largely back to where it was on 1 March 2020. That’s despite all of the impacts and changes with things like working from home.
Looking at Brisbane, the recovery has continued into 2021 with February average daily traffic (ADT) up 4% year on year. Excluding the Airportlink M7, it’s up 6%. There is obviously less traffic going to the airport right now.
Longer term trends
The prospects for the longer term are good, though some things are being delayed. The convergence of trends to create safer, more sustainable, integrated and automated road networks should support more kilometres travelled.
However, the concept of connected automated vehicles (CAVs) is progressing slower than previously thought.
However, there has been minimal change to ‘mobility as a service’. It’s looking at partnerships in targeted areas to develop practical use cases relevant to Transurban.
Summary thoughts on the Transurban share price
Transurban is an interesting one. There are long term growth expectations, but I wonder how many automated cars are going to use a toll road over using a free road when that’s available? Time will tell. Interest rates are expected to raise over the next few years, so I don’t think it’s an obvious buy today if asset plays like Transurban start to be impacted in valuation terms.
