Transurban Update

Submitted by Craig Strzelecki on 17 May, 2007 - 17:45

Transurban shares have a retained Hold, Medium Risk broker call and a higher price target of $7.83 from sharemarket analyst Citi Investment Research. Potential Takeover Valuation of $10.56ps, the analyst's looks at market's 'sentiment' cycle valuation of Transurban with top-cycle valuation of $9.34ps and low-cycle assessment of $7.35ps. Analyst has lifted their target price and align it with the mid-cycle valuation of $7.83ps (from $7.30ps). They believe that the takeover valuation of Transurban could be as high as $10.56ps. Nonetheless they retain a Hold/Medium Risk rating for the time being. Billions of dollars are being raised globally with dedicated mandate to invest in the infrastructure sector. With limited asset supply, the analyst's believe the attraction of an independent company with no management fee leakage, growth potential, and proven management looks obvious. Transurban fits the bill and could be vulnerable to moves by private equity investors. Transurban's balance sheet alone has the flexibility to take on additional $960m of debt. Together with observed equity betas of 0.55 and option value in the existing assets, a top-cycle valuation of $9.34ps does not look demanding. With no takeover offer on the table, the analysts see no immediate catalyst to unlock the balance sheet potential. While some of the option value and lower risk premium benefits are trickling through the share price, the analyst's are only prepared to ascribe value to what is in hand and in sight – mid cycle valuation of $7.83ps. Earnings Adjustment: As a result of successful acquisition of SRG, their earnings for Transurban have been adjusted upwards by between 5-19%.

Transurban Group is listed on the Australian Stock Exchange (ASX) under stock code TCL. You can view their investor website here. TCL was listed on the ASX on 14 March, 1996. David Ryan is the chairman for Transurban and Kim Edwards is the Managing Director. Transurban Group is the owner, operator and developer of electronic toll roads and intelligent transport systems. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade TCL. Check your charts and good luck with your share trading!

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