Toll road owner and operator Transurban Group (ASX: TCL) has announced another strong result today, reporting on its traffic and revenue during the March quarter.
Although traffic for the period was negatively impacted due to the timing of the Easter long-weekend (it fell in the March quarter in 2016, compared to the June quarter in 2015), Transurban still reported a 14.9% increase in proportional toll revenue to $473 million. This figure excludes minority interests in toll roads that are controlled by Transurban, but includes the company's interests in non-controlled assets.
The pleasing thing about the results is that Transurban's revenue continues to grow at a faster pace than the group's average daily traffic numbers, reflecting its pricing power over the market.
Similar to Sydney Airport Holdings Ltd (ASX: SYD), toll roads such as those owned by Transurban are amongst the country's most important infrastructure, saving travellers valuable time. Although nobody enjoys paying tolls, many will put up with higher toll fees rather than take the longer routes.
Here is a chart depicting the geographical performances:
One area investors should keep an eye on is Melbourne, which experienced a 0.4% decline in average daily traffic. Again, the timing of Easter is expected to have played a role in this decline, while major works on the CityLink Tulla Widening project (which began in March) may also have deterred commuters, but average workday traffic decreased by 0.2% while car traffic fell by 2.2% overall.
Notably, some of these cars were reclassified as light commercial vehicles which would partially explain the decline in car traffic and the 9.1% increase in truck traffic during the period. As highlighted previously, Transurban Group does have considerable pricing power, but push prices up too high and consumers could start to take alternative routes instead.
While that is something to monitor, Transurban is still worth further research by long-term investors. Although its shares are not cheap, Transurban is the owner of some of the country's most important infrastructure, while it also has a solid track record for growing dividends, a trend that could certainly continue into the future.
