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Here’s why the Transurban Group share price is climbing higher today

The Transurban Group (ASX: TCL) share price has edged higher in morning trade after the toll road giant announced a 11.3% jump in toll revenue to $502 million for the quarter ending March 31.

At the time of writing Transurban’s shares are up 1% to $12.06, stretching their year-to-date return to a stellar 16%.

Overall I can’t say I’m surprised to see its shares climb higher today. I feel it is fair to say that this was yet another impressively strong quarter for Transurban and its network of roads.

Average Daily Traffic (ADT) increased 5.3% during the period thanks to strong growth in the Brisbane and Greater Washington Area networks.

Brisbane ADT jumped 20.4% to 331,000 despite the negative impact of Cyclone Debbie. This led to a 28.9% lift in toll revenue to $94 million. Greater Washington Area ADT climbed 15.8% to 91,000 trips, with toll revenue growing 20.9% to US$35 million.

Whilst growth was a touch slower in Sydney, I felt its roads performed well nonetheless. Sydney toll revenue increased 9.8% to $215 million, with average daily traffic increasing 3.9% to 638,000 trips.

The only real disappointment was its Melbourne network. Melbourne ADT fell 0.5% to 806,000, leading to minimal toll revenue growth of 1% to $165 million. The decrease in traffic was the result of planned network wide disruptions caused by the CityLink Tulla Widening project.

Should you invest?

Whilst I am a big fan of the company, I’m not a huge fan of its current valuation. At around 97x trailing earnings Transurban is incredibly expensive in my opinion.

Its defensive qualities and strong long-term growth prospects are certainly attractive, but even so I still find it hard to justify the exorbitant premium.

As a result I think investors would be better off holding out for a pull-back in its share price. In the meantime investors may be better served with cheaper defensive investments such as Sydney Airport Holdings Ltd (ASX: SYD), InvoCare Limited (ASX: IVC), or ASX Ltd (ASX: ASX).

Alternatively these strong and steady investment options could be perfect for investors looking for defensive shares. Not only does each of them come at a great price, but they provide generous dividends as well.


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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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