We've entered the pointy end of the proceedings here at the Motley Fool's ASX World Cup with the best-of-the-best from the group stage battling it out for the title.
Today's match-up between Insurance Australia Group Limited (ASX: IAG) and Transurban Group (ASX: TCL) is sure to be a thriller, before kick-off let's review each companies stats.
| Insurance Australia Group | Transurban Group | |
| Market Cap | $13.8 billion | $14.1 billion |
| FY 2015 P/E ratio | 11.2x | na |
| FY 2015 Yield | 6.1% | 5.2% |
| Price/Book | 2.6x | 3.3x |
Game On
Both companies take to the field with impressive track records. Insurance Australia Group's share price has gained 70% in the past five years, while Transurban's is up 81%. In comparison the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has added around 40%.
This is serious added value – an early goal to both teams!
Investors love their dividends and while both companies tick the box on this measure, IAG is the star. The general insurer which owns brands including NRMA, CGU, SGIO and SGIC is currently offering investors a forecast fully franked dividend yield of 6.1%. Meanwhile Transurban, a toll road operator with assets including Melbourne's CityLink as well as roads in NSW and the USA is trading on a forecast yield of 5.2%, but its ability to frank is low.
IAG shoots and scores another goal!
Half time
As we enter the half-time break, IAG has taken a lead to be up two goals to one. The question on investors' lips now is – will the companies play defence or go for offensive growth in the second half…
Defensive play
With IAG up by a goal the insurer tries to play defensive however this turns out to be a flawed strategy. The inherent riskiness on an insurer's balance sheet leaves IAG open to attack from the superb monopoly infrastructure assets belonging to Transurban. The strong, recurring revenue base of Transurban allows the company to aggressively gear its balance sheet and provide a stable and predictable earnings base for shareholders.
A goal to Transurban!
Offensive play
With the teams neck-and-neck and the clock ticking down both teams must go on the offensive to avoid a sudden death shoot out.
IAG plays both its Asian growth hand and its domestic market share hand thanks to its recent acquisition of Wesfarmers Ltd's (ASX: WES) underwriting operations.
Transurban responds by stating it has plans to expand its USA interests – no doubt having kept a close eye on Macquarie Atlas Roads Limited (ASX: MQA). Overseas growth options coupled with its opportunistic domestic acquisitions have the company well placed to achieve future growth.
Two goals to Transurban!
Full Time
Despite some early successes for IAG, the growth profile of Transurban appears superior and offers investors exciting long-term potential. While IAG's potential to expand into Asia is also exciting, the enormity of this task shouldn't be underestimated.
Transurban wins the game 3-2.
