Is the share price of infrastructure business Transurban Group (ASX: TCL) a buy for income-seekers?
The last year has been very good for the toll road giant, its share price has risen by 31.9%.
Yesterday the infrastructure giant released its half-year result. It reported that average daily traffic rose by 2.3% in the six months to 31 December 2019.
Some of the other numbers that it reported were that proportional toll revenue increased by 8.6% to almost $1.4 billion and proportional earnings before interest, tax, depreciation and amortisation (EBITDA) (before significant items) rose by 9.5% to nearly $1.1 billion. Statutory profit came in at $162 million.
Underlying cost growth was only 2%, reflecting "cost discipline and recent investments providing scale benefits".
The half-year distribution of 31 cents per share, an increase of almost 7%, was fully covered by free cash flow of $927 million and the toll road business reaffirmed its FY20 distribution guidance of 62 cents for the year.
Projects
Transurban and its construction partners have completed five major projects and another two are expected to reach completion in mid-2020.
However, the West Gate Tunnel Project D&C contractor has purported to terminate the D&C subcontract and also noted their intention to continue works on the site. Transurban said it does not consider the D&C subcontract has been validly terminated and, as such, the contract remains valid.
In North America the 395 Express Lanes opened in November on time and on budget, with the combined 95 and 395 Express Lanes now stretching 63 kilometres. It has now commenced the procurement process for the 495 Express Lanes Northern Extension.
Foolish takeaway
Transurban is trading with a FY20 distribution yield of 3.8%. It has proven to be a solid performer over the last year and the last five years, but I think yield-chasers have pushed up the valuation a bit too far. I believe there are better-priced shares on the ASX for dividends and growth.
