Transurban Half Year Finishes Flat; Better Days to Come

As expected, wide-moat Transurban reported a relatively flat first-half fiscal 2022 result. Proportional EBITDA fell 4% from the previous corresponding period, or PCP, to AUD 805 million on weaker traffic volumes, particularly in Sydney, where the firm earned 51% of fiscal 2021 revenue. But vehicle usage quickly rebounds when restrictions are removed--as we saw in the December 2021 quarter with an increase in average daily traffic in all locations except omicron-affected Sydney. With government mandated restrictions largely removed or reduced, conditions should improve from here and we expect a stronger second half, finishing the fiscal year with EBITDA of about AUD 1.9 billion. We maintain our fair value estimate of AUD 12.00 per share and consider the stock to be slightly overvalued at present.