It is time to focus our attention on infrastructure investments as Tony Abbott plans to splash $20 billion across the sector as soon as practical.
Unfortunately for the rest of the share market, market strategists aren’t expecting any major moves in the immediate future following Abbott’s election victory.
Since Kevin Rudd’s return to leadership of the Labor Party, the market along with the rest of Australia had priced in a coalition victory, leaving little room for upside after the event.
The new focus of investors will be on policy changes and proposed expenditures. To capitalise on these changes, the trick is to be one step ahead of any announcements that may move a company’s share price.
The commitment to spend over $20 billion on new or upgraded infrastructure projects is set to boost the sector. In terms of the broader economy, the proposed spend will also help lift output and growth along the way.
Specifically, the companies best placed to benefit from the new government’s infrastructure spend include Leighton Holdings (LEI), Transurban Group (TCL) and Qube Holdings (QUB). Transurban is of particular interest, given its expertise in toll road construction and operation. Consequently, it could become a fair gauge for this section of Abbott’s plan.
Transurban has also been flagged as one of Eureka Report's top 10 takeover targets.
Transurban’s share price has lagged the broader market by 11% over the past year, having only gained 8.6%. Any government assistance in terms of project costs looks like it could give the share price a bounce, providing Transurban can manage costs on their side.
Even without additional work hurled in Transurban’s direction, the company’s growth prospects remain strong. It has the Hills M2 toll road in Sydney, making New South Wales Transurban’s primary growth market for the immediate future.
For Transurban investors, the road has been bumpy at times. The kicker for Transurban will be if the planned projects are privatised and they are first in line for operating the roads that may have tolls put in place.
There is no reason for Transurban not to be at the front of the line for work when it comes to executing the planned projects. There are other players that could vie for the work, but as it stands today Transurban looks to be the best fit, especially for any New South Wales projects.
Transurban could become the measure for the market's conviction about Abbott and his plans.