This week we have been focusing on a new tactical trade idea for Qantas. We…
August 11th, 2015:
Transurban published strong FY15 results in regards to equity but weak credit-wise, on the back of strong traffic growth (average daily traffic growth of 5% across assets) and increased toll revenues (proportional toll revenue growth of 39.6% and 10.7% when excluding acquisitions and impact of 95 Express Lanes), helped by acquisitions and consolidation of the US business.
- NSW: (42.8% of toll revenue contributions) traffic growth of 7.7% thanks mainly to additional capacity through road widening and ramp projects lead to toll revenue growth of 21.2% and EBITDA growth of 20.2%
- Victoria: (37% of contributions) saw traffic growth of 3% with toll revenues increasing 7.8% and EBITDA growing 11.3% thanks to increase average week-end/public holiday traffic growth and reduction in operating expenses.
- Queensland: (15.9% of contributions): saw traffic growth of 2.7% thanks mainly to rectification works for Logan Motorway in 2H15, whcih led to toll revenue growth of 6.8% and EBITDA growth of 12.2%, with integration track, enabling EBITDA margin expansion of 3.60%.
- US: (4.3% of contributions) saw traffic growth increase 139.7% which pushed toll revenue growth to 206.5% as 95 Express Lanes opened and performed better than expected
- Proportional EBITDA grew by 38% (excluding acquisitions 13.1%). Statutory EBITDA was up to $782m from $759m in FY15 thanks to contribution of acquisitions and consolidation of US businesses for $364m, but was also impacted by significant items: $384m of stamp duty, integration costs of $23m and transdaction costs of $22m for the acquisition of Queensland Motorways. Excluding these items, EBITDA would be up to $1,211m.
As a result of increasing financing costs and significant items, Operating cash flow decreased from $521m in FY14 to $304m in FY15. Moreover as Transurban stepped up its capital expenditures, raised debt (and equity) to finance its Queensland acquisition, net debt increased from $3.9bn at the end of FY14 to $10.85bn (including $6.3bn of non-recourse proportional debt), deteriorating its credit metrics substantially.
Net leverage increased from 4.2x to 8.4x, gearing increased from 39.7% to 64% when taking into account non-recourse debt (excluding non-recourse, gearing increased from 36.4% to 40.2%)..
Outlook/Guidance: Aside from an upgraded FY16 distribution guidance of 44.5c, Transurban did not provide much of an outlook or guidance and reiterated its commitment to “strong investment grade credit metrics”.
Next Event: Transurban next quarterly traffic statistics will be announced in October and 1H16 results to be published in February 2016.