Weak First Half but Transurban's Growth Should Now Resume

Wide-moat-rated Transurban reported an understandably weak first-half fiscal 2021 result. Proportional EBITDA fell 23% from the previous corresponding period to AUD 840 million on weaker traffic volumes, particularly in the U.S. and Melbourne. Conditions should improve from here and we expect significant growth in the second half as the firm cycles the heavily virus-impacted second-half fiscal 2020, which produced EBITDA of just AUD 794 million. Traffic volumes in Sydney and Brisbane early this year have been as good as or better than pre-COVID-19 levels. Melbourne is rapidly improving and we expect U.S. roads to recover through 2021. However, temporary setbacks are likely as lockdowns may again be needed to keep the virus under control. We downgrade our fiscal 2021 EBITDA forecast by 2% to AUD 1.8 billion. Medium-term expectations for EBITDA to grow at an average annual rate of 11% from fiscal 2020 are unchanged. We maintain our AUD 12 per security fair value estimate and consider the stock slightly overvalued at present.