Transurban Group (ASX- TCL) | Share News & Stock Fundamental Analysis | Long Term or Short Term By Investing Made Simple by CA Puneet Jajoo

Hello smart nation and welcome once again to smart, Ozzy, TV Australia's, leading YouTube channel where we discuss the fundamentals of the company I'm, your friend unique Joe, Joe, qualified CPA with you and today, as you can see on your screen, we would be discussing Chance urban group now friends. We all know trans urban is into highways and tall collection, but recently this group is in a bit of trouble. In fact, a lot of trouble due to the lockdown imposed by code 19 and the traffic has come down substantially, but the moot point is to what extent that fallen traffic is going to hit transfer urban group, and can we expect a dividend payment interim dividend in the final dividend or not? What is the dated Less? How much debt is this company having? What is the maturity profile? Will the company be able to meet its debt obligations, or is it going to default all this and much more? We are going to discuss in this video. So please stay with me right till the end of this video and I hope. All of you have already subscribed to this channel. If not kindly do so now, because I would love to see all of you as these subscribers.

Alright, let's move on so smart nation here, I present the details of transfer one group on your screen now transfer one group was listed on a six in the year.1996 and transfer. One is a leading tall road owner operator, with a portfolio of 14 assets on the eastern seaboard of Australia and in Virginia us concession lives are fixed with tall roads handed back to their respective governments. Debt-Free. At the end of the concession, the weighted average concession life of the portfolio is close to 30 years, so smart nation, that was the business profile. It has a portfolio of 14 roads in Australia, as well as in the United States, and it has to hand it back to the government once the conversation is over generally, the average concession life at the moment is thirty years, so it has to recover its full capital expenditure within that period of time and the current market price of this talk is thirteen dollars and forty cents, which makes it a cap market cap of thirteen.

Thirty-seven point: two billion dollars now: look at the PE ratio: 163, which means the price to earning multiple, is very steep, very high. It's a very expensive, expensive price at thirteen point, two dollars with a PE valuation of 163, because just to put it in perspective, other companies are even companies which are paying dividend are not going it more than twenty de and this company is at fifty-one sixty-three, but is it going to stay at 163? Or is it going to come down or go up now? It depends upon the demand and supply how highly the market perceives that it is going to improve its operations. Let's proceed now further. Now the interesting thing is the debt. It has a debt of twenty point: six billion dollars on its balance sheet.

Yes, friends, smart nation, twenty point, six, which makes a debt equity ratio of above four, which is quite high. So if the interest rate moves upward, but of course we know it's not going to move upwards so soon, but you never know if the inflation picks up, the interest rates will go up and all those companies are going to be in deep, deep trouble. In fact, this company is already in a bit of trouble because it has raised some additional debt to repay the maturing that now, let's discuss that and the company release. So in April cross urban made a press release, and it said during the quarter transfer bond raised 2.1 billion dollars of new debt facilities, including 1.3, in new working capital facilities. So the reason is that its traffic has fallen quite a lot.

If you see, during the average daily traffic decreased by almost 5%, with all a certain markets, significantly impacted by the restrictions and movement mandated by governments and respond to covert 19 virus. So friends, any company which is neck deep in debt is going to be in trouble when such kind of thing happens so- and we are saying that in time and again in Sydney airports or transferred now we're discussing transl transferable, they all are raising additional debt. Why is that so? Just to service their existing debt, and it doesn't strengthen the balance sheet. It weakens the balance sheet. What sense is strengthens a balance sheet is additional capital because capital you do not have to repay equity capital, but that you have to repay.

If you raise the additional debt it weakens, it weakens the balance sheet. Alright, smart nation, coming back to some more numbers now this company has been paying dividend consistently and the average yield is above four percent, but the franking is low, it's less than 15 percent for all the years. But now there are some interesting concerns that we should be aware of. Concessions on of the Australian. Roads are set to end between 20s to 21 2026, to 2060, with a weighted average remaining concession of less than 30 years that we have already discussed now to extend its existence.

Chance urban will look to build new roads or undertake road upgrades which may require new equity issues or increased financial leverage, given that the forum currently pays out all free cash flow as distribution to investors. Now this is a huge, huge red flag for a company which is neck-deep in debt that it pays out and tire fee free cash flows to its investors. It doesn't retain anything for future capital expenditure and if it has to expand it so business, it will take on additional debt or equity. Now we have just seen that it has taken additional debt. Now this kind of thing should it weakens the balance sheet.

It weakens the business for why it doesn't strengthen the business now. Okay, building and acquiring new roads can destroy equity value as a result of over bidding and overly optimistic traffic forecast. Fortunately, most Durham new project is non Rico's to the rest of the crew. The corporate structure and reporting are complex and opaque, and the recent move to reduce financial disclosure is disappointing. The first two u.

s. investments were disappointing. Equity in coconut house was written down to zero because of poor traffic numbers and the 495 Express Lanes initially under well, so smart nation. These were huge concerns for trans urban group, which should be really consideration, really take it seriously, and so friends, that's pretty much it about crosses urban group. TCL I hope you really enjoyed this video before you leave please hit the thumbs up.

Button hit the like button and do subscribe to this channel. I would really love to see all of you as subscribers. Thank you once again, for being with me, I really enjoyed your company. All right have a good one.

Source : Investing Made Simple by CA Puneet Jajoo