The S&P/ASX 200 Index (ASX: XJO) stock Transurban Group (ASX: TCL) has largely been travelling sideways since the onset of COVID-19, as shown on the chart below. According to some experts, this weak valuation could make the business an acquisition opportunity.
Transurban is a major toll road business with roads in Sydney, Melbourne, Brisbane and North America.
It has been one of the ASX 200 stocks that has struggled through high interest rates. Not only has this increased the cost of debt (impacting profitability, cash flow, and distribution), but it has also hurt Transurban's market value.
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Experts call the ASX 200 stock a tempting target
According to the Australian Financial Review, Ray David, a portfolio manager at Blackwattle Investment Partners, thinks Transurban shares could appeal to superannuation funds because the toll roads have long-term contracts that enable them to continue increasing toll prices even if the economy is weak.
It was noted that many of Transurban's toll contracts in Australia allow the business to increase its fares by 4% or the rate of inflation. David said:
Their roads are typically local monopolies…pretty much there's no competition. Toll roads are also defensive assets, with non-cyclical characteristics, which are getting more expensive to replace.
Private sector partners such as Transurban offer both governments and super funds the expertise required for crucial infrastructure development which has failed to keep pace with population growth.
David, whose fund currently holds Transurban shares, isn't the only expert who believes the ASX 200 stock could be an appealing target for large investors seeking defensive earnings.
According to the AFR, Sarah Shaw, chief investment officer at 4D Infrastructure, said:
It remains an incredibly attractive pool of assets for someone that wants a long term, resilient earnings stream. People will pay for a premium for that.
Shaw also noted that if Transurban were not a listed business, the negotiations with NSW and other governments would be "less noisy" as it wouldn't need to report to public shareholders.
Transurban share price snapshot
The ASX 200 stock has declined approximately 2% since the start of 2025. Time will tell whether this valuation is tempting enough for a takeover bid.
