Transurban hits the gas

Transurban's strong revenue lift in the September quarter could see the stock re-rated by investors.

Scott Charlton’s steady as she goes strategy is bearing fruit.

Along with an uptick in the economy, his idea of tickling up Transurban’s (TCL) existing assets and extracting more value rather than embarking on grand expansions is behind the strong revenue rise in the September quarter.

Proportional toll revenue jumped 13.6% to $275 million in the September quarter largely as a result of an upgrade to Sydney’s M2 toll road.

Other opportunities exist to advance the high growth, low risk strategy, particularly the proposed link between Transurban’s existing network and the F3 (now known as the M1) free to Sydney’s north along with the duplication of the M5 East tunnel.

While the group has opted not to tender for Melbourne’s east-west link, the new tunnel should deliver more traffic into its CityLink toll road.

In addition to those projects, the company has been mooted as the most likely buyer for Sydney’s Cross City tunnel, which recently was put into receivership for the second time since its construction a decade ago.

Some analysts believe Transurban could consider a purchase of Queensland Motorways owned by QIC, which has a network series of toll roads around Brisbane similar to the company’s  Sydney network.

As Transurban’s portfolio currently stands, earnings are expected to grow until 2034 when the CityLink concession ends.

The company’s share price took a battering in the aftermath of Ben Bernanke’s talk of tapering the Quantitative Easing program as rising bond yields sucked cash out of infrastructure stocks.

That was one factor behind a series of upgrades to the stock by major investment banks, many of which argued the selling had been overdone.

The stock rose more than 2% immediately after the announcement this morning but since has settled back to $6.93, up 1.4%.