Reporting Season: Citi take negative view on Transurban

By Trevor Hoey. Published at Aug 8, 2018, in Features

Name: Transurban Group (ASX:TCL)

Market Capitalisation: $26.7 billion

Share Price: $12.02

Analysts at Citi didn’t see enough in Transurban’s fiscal 2018 result, which was delivered yesterday, to shift its recommendation from ‘Sell’.

In fact, the broker downgraded its share price target from $10.52 to $10.39, well below yesterday’s closing price of $12.02.

It should be noted that broker projections and price targets are only estimates and may not be met. Those considering this stock should seek independent financial advice.

Transurban has a dominant position in the tollroad industry with assets in Sydney, Brisbane and Melbourne, as well as North America.

While these assets have underpinned strong investor support for the company, having driven robust growth in both earnings and dividends, the company has reached the stage where further growth will require substantial capital expenditure.

The most prominent near-term share price catalysts could be the potential 51% sell down of the West Connex Tollway by the New South Wales government.

Analysts at Morgans said their modelling indicated that Transurban has the capacity, when combined with capital releases, to fund its committed project pipeline. However, it noted that the significant construction, traffic, operating and funding risk of WestConnex (WCX) meant a capital raising would likely be required to fund a successful WCX acquisition.

Citi sees little upside either way

Regarding yesterday’s result, Citi noted that the fiscal 2019 dividend guidance of 59 cents was below consensus of 60.5 cents per share, for the lowest dividend growth since 2013.

The broker said that the 2019 dividend would not change if the company acquires WCX, and may provide scope for a dividend upgrade if it is unsuccessful.

However, it is of the view that the WCX outcome may be academic, focusing more on earnings headwinds, debt amortisation on the Eastern Distributor from 2019, continued M5 debt amortisation, tax payable at the corporate level from fiscal 2021, and a $5.1 billion committed capital expenditure program between 2019 and 2023 that could be subject to rising interest rates.

These are the key issues that underpin the broker’s sell recommendation.

Those considering this stock shouldn’t make assumptions regarding future earnings, nor should they base investment decisions on performances to date. Those considering this stock should seek independent financial advice.

View Our Investment Portfolios

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why is Australia’s leading small cap publication

Founded seven years ago, is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise. provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more. is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!