What Happened to the Transurban Share Price?
Transurban Group [ASX:TCL] develops, operates and maintains toll roads across Australia and America. TCL has a 100% interest in City Link in Melbourne and Hill M2 and Lane Cove Tunnel in Sydney. Other Australian assets include Eastern Distributor (75.1% interest), M5 South West (50%) and Westlink M7 (50%) in Sydney.
They also have three joint ventures in America.
In total, TCL manage 1200 kilometres of roads in Australia.
Transurban’s share price closed 1.72% higher on Wednesday
Why Did This Happen to TCL Shares?
Yesterday, TCL’s full year June 30 details became available.
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While revenue from ordinary activities was down 3.8% year on year (YOY) to $1.15 billion, almost all the other numbers went up.
Net Profit After Tax (NPAT) was a massive 64% higher to $282 million ($175 million the previous year). Toll revenue increased by 13.1% to $906 million. In addition, the company increased the full year dividend to 4 cents 35 cents.
It’s worth noting, however, that the increase in NPAT is driven by a 59% fall in construction costs from the previous year. In the past, Transurban have spent significant amounts on costly upgrades.
Two things bumped up revenues. Increases in traffic (up 6% YOY), especially on the Hills M2 and Citylink infrastructures, and toll price growth (UP 12% YOY).
What Now For Transurban Group?
While TCL has proven a profitable stock this year, gaining 12% to date, it’s worth remembering that it is heavily indebted.
Transurban has $6.8 billion in debt outstanding, and the finance costs this year were $470 million. All other costs totalled $391 million. However, in a first, the dividend is coming from cash flow rather than debt (as has previously happened).
The increase in dividend payment for 2014 means it yields around 4.5%. Also, Transurban estimate full year 2015 dividend to rise to 39 cents.
TCL’s yield and its crushing monopoly on major freeway infrastructure make this stock hard to ignore.
Shae Smith+
Editor, Money Weekend
The post Why the Transurban Share Price Rose Today appeared first on Stock Market News, Finance and Investments | Money Morning Australia.
