Toll road owner and operator Transurban Group (ASX: TCL) has reported a strong 17% lift in revenue during the September quarter to $427 million, compared to the prior corresponding period.
At the same time, proportional toll revenue, which the company believes is the most accurate reflection of its overall performance, increased by 18.9% to $446 million.
So What:
Transurban is the company behind some of Australia's biggest and most important toll roads, including CityLink in Melbourne and six roads in Sydney (including the Hills M2 and Lane Cove Tunnel), with five roads in Brisbane and two in the United States.
Sydney accounted for the vast majority of growth during the period, mostly thanks to a 24.3% increase in revenue on the Westlink M7, which Transurban owns 50% of at the moment. This was due to an increase in the truck toll multiplier to 1.67 times the car toll. Notably, this will increase to 3 times the car toll on 1 January 2017, providing even more of a boost to the top line.
Meanwhile, revenues from Transurban's US operations jumped 257% to US$28 million thanks to the addition of the 95 Express Lanes which became operational nine months ago. Brisbane's proportional toll revenue jumped 9.3% to $68 million and revenue from Melbourne jumped 6.7%.
Investors may have been disappointed with the Melbourne result, which was impacted by an incident that occurred near CityLink which impacted traffic on the road for seven days.
Now What: Much like Sydney Airport Holdings Ltd (ASX: SYD) and APA Group (ASX: APA), Transurban Group owns some of Australia's most critical infrastructure, providing it with a somewhat defensive earnings stream that should generate substantial cash flows for many, many years.
This has even resulted in consistent growth in the company's dividend payouts a trend I expect will continue in the years to come. Although an investment in Transurban is not without its risks, $9.81 (the current price) seems like a reasonable price to pay for Transurban's shares.
