Cost discipline and new opportunities the highlights from Transurban's results

• Statutory NPAT ($15 million) vs expectations of $196.5 million
• Proportional Toll Revenue $1.872 billion vs $1.89 billion
• Distribution 32.0 cps - in line with expectations - paid on 25-Feb-25 for the six months ended 31-Dec-24

Outlook

• Reaffirms its FY25 distribution guidance of 65.0cpss, inclusive of the distribution of 32.0 cents per stapled security for the six months ended 31-Dec-24.

What was the key takeaway from this result?

It was a good result marked by slightly better traffic than expected, but also really good cost control, which led to the beat from Transurban.

Were there any surprises in this result that you think investors need to be aware of?

The cost control was good.

It won't necessarily be maintained at the same level for the full year, they said there'll be some second-half costs, but certainly that's a positive overall.

They've brought down their cost guidance and that's discipline we've been hoping to see from the company for a while.

They're starting to look into new markets. They mentioned New Zealand as well as some markets outside Virginia and the US which they've talked about before.

So they're looking to maintain discipline around those new markets, so potentially a positive there.

Would you buy, hold or sell TCL off the back of this result?

Rating: BUY

It is a buy for us, on incrementally positive news. 

Again, we've been looking for cost control for a little while. With that coming through it's incrementally positive, and we're starting to see the traffic recovery come through as well, as construction works roll off. 

The US has been particularly strong and will also benefit from Trump's back-to-the-office order for federal government employees. So that's certainly a positive for Transurban. 

Are there any risks that investors need to be aware of?

There are always risks if they push into new markets. 

They've done a good job of that historically, so I'm relatively comfortable there. 

They still haven't reached a resolution on the New South Wales toll review. But the commentary seems to be that the talks are constructive and the government again has reiterated that they're going to honour the contracts. 

There's probably some risk around the structure of any new agreement, which could affect the timing of cash flows within the business, but ultimately I think the value should be protected at the very least.

From 1 to 5, where 1 is cheap and 5 is expensive, how much value do you see in the infrastructure market?

Rating: 2