Toll road operator Transurban Group (ASX: TCL) today announced proportional EBITA was up 12.8% for FY 2014 to $934 million on revenues of $1.17 billion.
As an infrastructure business with competitive advantages Transurban is a firm favourite with income-seeking investors who were rewarded in FY 2014 with a partially franked 35 cents per share payout. Moreover, the group has forecast a partially franked payout of 39 cents per share in FY 2015 placing it on a yield of 5.12% when selling for $7.61.
Having acquired the rights to operate five of the six toll roads in Brisbane recently, Transurban now has a solid three-city footprint across Melbourne, Sydney and Brisbane, with a new development focus on the eastern seaboard of Australia. In the last financial year almost half of all toll road revenues came from Melbourne's CityLink toll roads.
Transurban saw average daily traffic growth of 6% over the year, which is good news because as traffic volumes grow it is able to charge drivers more to use those roads. The fact that most drivers have few realistic alternatives is what makes its toll roads such excellent defensive assets for the company and its shareholders alike.
The group is also able to issue debt to fund future purchases like those of the Queensland Motorways as buyers of that debt are able to take assurance from Transurban's reliable cash flows funding timely repayments. Gearing has to be managed carefully, but standing at 41% as at June 30, 2014, it's not excessive given the reliable income streams the business possesses.
It's no surprise that in a low cash rate environment the market places a high value on equity in Transurban with the group trading on around 40 times earnings. With room to expand its portfolio, raise revenues and cut costs in the future, Transurban remains a solid prospect for long-term investors.
Shares were steady at $7.61 in afternoon trade.
