Free flowing

17 Apr 2023

Sector: Industrials

3Q TRAFFIC UPDATE

Need To Know

Group traffic volumes increased 12.9% on 3Q22
WCX M4-M8 traffic exceeding expectations
Airport related traffic increased across all Australian markets

TCL announced a record 3Q in traffic volumes, driven by strong Average Daily Traffic (ADT) in Sydney and Brisbane in particular. The Covid-19 recovery is largely complete, with the Melbourne City-Link road being the only real laggard, with ADT volumes ~5.7% lower than 3Q19. Weekend traffic and large vehicle traffic volume remained strong, with car and weekday travel continuing to improve.

Inflation linked. The full force of TCL’s inflation hedged business model is on display, with the WestConnex annual toll escalation of 6.1% taking place on 1 Jan 2023. Brisbane assets excluding AirportLink M7 annual toll escalation of 6.0% took effect on 1 July 2022 and the AirportLink M7 annual toll escalation of 7.9% took effect on 1 Jan 2023. North American assets in the Greater Washington area also saw the introduction of a 3x toll multiplier for medium vehicles in Dec 2022, with ~2.6% of traffic paying the higher toll.

New assets. The WCX M4-M8 opened to traffic on 20 January, which has so far exceeded the project expectations. A single WCX trip can now include multiple assets, with ~5.5% of WCX trips qualifying for the toll cap (with tolls being based on distance travelled and flag fall, up to a maximum cap).

Investment View

Traffic volumes continue to improve, with most roads either meeting or exceeding pre-Covid levels. Inflation-linked tolls are clearly contributing to strong revenue and margin growth. TCL is a well-managed vertically integrated toll-road company, with several large-scale growth options. Rising bond yields have pressured the share price over the last 12 months, although have recently begun to reverse, seeing TCL start to outperform. We retain our Buy recommendation for TCL.

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Stock Overview

Share Price

Company Overview

Australia-based toll-road operator and developer which operates in Australia (Sydney, Melbourne and Brisbane) and North America.

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