The Transurban Group (ASX: TCL) share price is in focus after the toll road operator revealed solid traffic growth in its latest quarter.
Transurban is the owner, operator and builder of toll roads in multiple places – Sydney, Melbourne, Brisbane and North America.
Strong traffic growth in March 2023 quarter
Transurban revealed that average daily traffic (ADT) increased 12.9% year on year in the March 2023 quarter. It was a record third quarter traffic update for the business.
Sydney ADT rose 12%, Brisbane ADT increased 14%, Melbourne ADT went up 13% and North American ADT grew 15%.
Transurban said it benefited from strong traffic, as well as new assets and enhancements that have come online. The WestConnex M4-M8 link opened to traffic on 20 January – traffic has exceeded original projection expectations.
Weekend traffic remain “strong”, while car and weekday travel improved. Large vehicle traffic remained “strong” and airport related traffic increased across all Australian markets.
Agreements signed
Transurban said that it and its partners reached financial close on plans to widen the M7 Motorway and connect with the new M12 Motorway in Western Sydney on 28 February 2023.
It also said that it reached financial close on an agreement to introduce CDPQ, a global investment group, as a 50% partner in the A25 asset for total sale proceeds of C$355 million on 1 March 2023.
Is the Transurban share price a buy?
It’s a great sign to see that traffic has recovered so much that it was a record for the business.
Earnings growth is what typically sends share prices higher over the longer-term, so that’s a good sign. At the time of writing, the Transurban share price has risen by 7% over the last year.
On the one hand, the business is benefiting from inflation which is driving toll prices higher. However, inflation has increased interest rates which hurts valuations, including for asset-based businesses like Transurban.
I think Transurban has a promising future, particularly as the business sees population growth where it operates.
But, with how high interest rates are, I do think there are other ASX dividend shares could be better value and offer better dividend yields.
