TCL
Transurban result is out.
An upgrade to distribution guidance, predicated on the usual items, population growth at the core of it, but also COVID normalisation, and improved freight volumes.
Transurban has a portfolio of world class concessions (motorways, with many years left to run them) in a world that heavily favours cars and trucks. That’s at the heart of the thesis.
It has a majority of CPI-linked escalations (68%), which mean the impact of inflation is blunted (the approximate remainder is capped at fixed annual rate rises of ~4.25%) albeit the stock is still exposed to movements in debt servicing costs, and the markdown to NPV that happens from higher rates with longer duration stocks.
We often use the frame “long runway to earnings growth” when talking about secular growth stocks, in TCL’s case it is literal, with a significant number of large projects in the pipeline, and a good track record of delivering on those projects, and achieving targets (volumes) while maintaining high margins.
On balance, given we are uncertain (well, outright bearish) on the outlook for Australian shares, relative to international, an exposure to TCL gives us a high quality defensive with some inflation protections.
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