This week's update from toll road and tunnel operator Transurban Group (ASX: TCL) was upbeat and showed that the company is making encouraging progress. For example, toll revenue increased by 17% to $427m in the September quarter and proportional toll revenue, which the company believes is the most accurate reflection of its portfolio's performance, improved by 18.9% versus the previous comparable period.
This strong top line growth is forecast to translate into impressive bottom line increases over the next two years, with an annualised growth rate in earnings of 71.4% being anticipated by the market. Looking further ahead, Transurban is set to gain a further boost from development projects coming onstream across the US and Australia, such as the CityLink Tulla widening project in Victoria which is set to open in 2018.
Furthermore, Transurban's 95 Express Lanes in Virginia US, continues to have upward pricing potential after its relatively recent opening. And, with cost savings continuing to come through, such as the 7.6% reduction in CityLink's operating expenses last financial year from the direct management of road operations and customer contact initiatives, Transurban appears to have a coherent strategy through which to generate efficiencies and improving profitability to go alongside its long term cash flow prospects. With its shares trading on a price to earnings growth (PEG) ratio of 0.76, it remains better value than the ASX which has a PEG ratio of 1.4.
Similarly, specialist lender FlexiGroup Limited (ASX: FXL) also appears to offer excellent value for money, with its shares trading on a price to earnings (P/E) ratio of just 8.5. That is considerably lower than the ASX's P/E ratio of 15.7 and, with FlexiGroup being expected to increase its bottom line by 3.4% per annum during the next two years, its shares could easily justify a higher rating.
A potential catalyst for this to take place could be a rumoured deal for FlexiGroup to acquire Fisher & Paykel Finance for around NZ$300m. This would increase FlexiGroup's exposure to the New Zealand economy, with Fisher & Paykel being behind credit products such as the Q-Card. And, with potential synergies on offer as well as a fully franked yield of 7.1%, FlexiGroup remains a top notch long term play.
Meanwhile, Super Retail Group Ltd (ASX: SUL) continues to buck the trend of declining investor sentiment towards retailers amidst weakening consumer sentiment, with its shares rising by 24% since the start of the year. And, like FlexiGroup, Super Retail is rumoured to be considering undertaking M&A activity, with a $500m bid for RCG being mooted.
Whether or not this comes off, Super Retail continues to make progress with its strategy of restructuring, with it closing unprofitable stores and making advances with its multi-channel offering. Furthermore, Super Retail is investing in its supply chain and seeking to make additional efficiencies which, while in the short run may hurt its financial performance, are likely to have a positive impact on margins in the medium term.
For example, Super Retail recently completed a three-year plan to build a more efficient distribution centre network and, with its shares trading on a price to sales (P/S) ratio of 0.79 versus 1.38 for the wider market, they appear to be worth buying right now.
