The Transurban Group (ASX: TCL) share price could be driving higher from here.
That's the view of the team at Morgans, which has just named it among its best ideas for March.
Where is the Transurban share price heading?
According to the note, the broker has an add rating and $14.29 price target on the toll road operator's shares.
Based on the current Transurban share price of $12.51, this implies potential upside of 14% for investors over the next 12 months.
In addition, Morgans expects a 35 cents per share distribution in FY 2022 and then an increase to 53.7 cents per share in FY 2023.
If you add FY 2022's dividend yield of 2.8% into the equation, this brings the total potential return on offer with its shares to almost 17%.
Why is Morgans bullish?
Morgans is bullish on the Transurban share price due to the company's exposure to urbanisation and the growth in regional population and employment. It expects this and its growth projects to underpin a rapid recovery in its dividend as COVID headwinds ease.
Its analysts explained: "TCL owns a pure play portfolio of toll road concession assets located in Melbourne, Sydney, Brisbane, and North America. This provides exposure to regional population and employment growth and urbanisation. Given very high EBITDA margins, earnings are driven by traffic growth (with recovery from Covid) and toll escalation (roughly half at CPI and the remainder fixed c.4% pa)."
"We think TCL will continue to be attractive to investors given its market cap weighting (important for passive index tracking flows), the high quality of its assets, management team, balance sheet, and growth prospects. Watch for rapid recovery in DPS alongside traffic recovery and WestConnex acquisition prospects. A negative overhang is the contaminated soil disposal issues related to its West Gate Tunnel Project," it added.
