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Saturday, July 11, 2020

Transurban share price falls despite a positive market update

The Transurban Group (ASX: TCL) share price has fallen this morning despite a positive market update. What did Transurban have to say?
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Busy freeway and tollway, transurban share price
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The Transurban Group (ASX: TCL) share price has edged lower this morning despite the company providing a positive update. It is down by 2.18% at the time of writing.

Gradual recovery in traffic volumes

Pleasingly, Transurban reported today that it has seen a progressive recovery in traffic volumes across Australia. This recovery began in mid-April and correlated with the easing of government restrictions as the impact of coronavirus improved.

There had previously been a sharp decline in traffic numbers from early March due to COVID-19 restrictions. Transurban noted today that declines in traffic volumes from the commercial segment have been less severe.

Despite the positive news, Transurban pointed out that traffic volumes in the near future will still be highly impacted by any further government responses to COVID-19. This will be especially significant in the event of subsequent waves of the pandemic. 

Recovery of traffic volumes in North America has been slower than in Australia. This is due to the higher impact of COVID-19 restrictions in this market, particularly in the greater Washington Area.

Global project update

In Australia, Transurban advised that its NorthConnex initiative located in Northern Sydney is on track to open in the first quarter of FY2021. Also in the Sydney area, the M8 motorway is expected to open during this quarter. The M8 will connect with the M4-M5 Link, which is currently under construction, as well as the M6 Extension which is in procurement.

In North America, construction on both the Fredericksburg Extension and 495 Northern Extension projects continues to progress well.

Final FY2020 dividend of 16 cents per share declared

Transurban today declared a 2H FY2020 distribution of 16.0 cents per share. This takes Transurban’s overall FY2020 dividend distribution to 47.0 cents per share which is down on its FY2019 distribution of 60 cents per share.

Strong liquidity position

Despite the challenging conditions, Transurban commented that it remains in a strong liquidity position. It believes that the company has sufficient funds on its books  to meet any capital requirements and debt refinancing obligations that may arise before the end of FY 2021.

Transurban’s overall cash position has improved since the height of the crisis on the back of rising traffic volumes. The company further noted that this now places it in a stronger position to capitalise on any emerging opportunities.

Can the Transurban share price push higher?

The Transurban share price has recovered fairly strongly since its March lows at the peak of the coronavirus crisis. With a 2.18% share price decline so far today, it is still trading below its 12-month peak in February, despite the positive news release. It will be interesting to see if the Transurban share price can push higher in the weeks ahead.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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