Shares of Transurban Group (ASX: TCL) are lifting in early trade on Wednesday and are now fetching $14.22.
The Transurban share price has been on a gradual walk northwards these past few months. Transurban shares are now clipping a 4% gain since trading resumed in January.
Top broker remains bullish on Transurban shares
In a recent note, analysts at major investment bank JP Morgan retained its overweight rating on Transurban. The broker values the company at $15.85 per share.
Sharing its investment thesis on the company, JP Morgan noted Transurban's wide geographical footprint which spans several jurisdictions.
"[Transurban] has the largest portfolio of toll roads in Australia, and its traffic growth is relatively predictable and has historically materially outpaced GDP growth," the broker said.
"Traffic growth per year has typically been 2-4% and has averaged 3%, but going forward we expect 2%," it went on to add.
"We believe development completions (WCX, NCX) will be cash flow accretive coupled with built-in annual toll increases of at least CPI or 4%."
JP Morgan notes one other factor, which is Transurban's apparently 'underappreciated' dividend which appears juicier when looking into the future. This might be just what investors who hold Transurban shares want to hear.
The broker argues the outlook for Transurban's dividend is "materially improving from FY23". This is based on several factors, including "inflation linked tolls; and structural changes to traffic flow through."
"We forecast a dividends per share compound annual growth rate (CAGR) of 10% p.a. over FY21-FY31 believing this has been underappreciated."
Sentiment tilted to bullish
Six other analysts join JP Morgan in rating Transurban shares a buy right now. Whereas five and three brokers say it's a hold and sell, respectively, per Bloomberg data.
The consensus price target from this list is $14.27 per share. This places questions on whether Transurban shares are at fair value right now or not.
In the last 12 months investors have rallied Transurban by 3%. Meanwhile, the wider S&P/ASX 200 Index (ASX: XJO) market has settled on a 1% gain.
