Collecting the Toll

Transurban Group recently released its September quarter 2017 update on traffic and revenue performance, which in Ord Minnett’s view was generally positive. We reiterate our Buy recommendation with a $13.50 target price.


  • Proportional toll revenue grew 11.4% in the first quarter, ahead of our 10.1% forecast for the full year. This was particularly pleasing given the disruptive influence of the Melbourne CityLink Tulla Widening (CTW) project on its most important toll road, which recorded a 2.3% fall in average daily traffic (ADT).
  • The Sydney network reported proportional toll revenue growth of 12.3%, driven by slightly better than anticipated ADT numbers on the Eastern Distributor (with the closure of the Cleveland Street exit), the M2 and the M7, as well as the increasing proportion of trucks in the mix. We believe Melbourne benefited from the increase in truck multipliers, recording a 13.4% increase in toll revenue.
  • Greater Washington Area proportional toll revenue growth of 16.9% in the quarter was running below our 40.5% forecast for the full year, with ADT increasing just 6.1% on 495 Express Lanes compared with the fourth-quarter 2017 growth rate of 18.6%. This is significant as Greater Washington Area accounts for 9.1% of group operating earnings.

The CityLink Tulla Widening project is near completion and the toll road is now expected to open in late October, three months ahead of schedule and budget. Some night works will continue until year-end, but all lanes will be open during peak hours.


Management commentary at the recent AGM indicated it continues to believe planning approvals for the West Gate Tunnel project will be granted by the end of 2017, with construction to start soon after. The outcome of the Inquiry and Advisory Committee (IAC) hearings and its subsequent report, due to be released on 23 October, could be instructive as to how this will proceed.

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