Key points
- Macquarie Atlas Roads is the only major listed toll road operator with a diversified portfolio of European and American assets and a yield above 5.0%.
- It is about to benefit from refinancing a large portion of its debt at significantly cheaper rates.
- Equity Trustees has a 12-month target price of $3.70.
How long have you held the stock?
We’ve had an overweight position in Macquarie Atlas Roads Group (ASX: MQA) versus the benchmark since August 2014.
What do you like about it?
Macquarie Atlas Roads is a toll road operator that provides exposure to a quality defensive distribution stream through a portfolio of toll roads in France and the US. The business has been de-risked after the GFC and is able to support its distribution from internally generated cash. Macquarie Atlas Roads is expected to benefit from refinancing a large portion of its debt (approximately €2.6 billion) at significantly cheaper interest rates. This is supported by two S&P credit upgrades since December 2013 to BBB (Positive Outlook) and a recent debt refinancing of €700 million, which reduced its interest expense from approximately 7.5% to less than 2.0%.
Macquarie Atlas Roads Group (MQA)
Source: Yahoo!7 Finance, 12 February 2015
How is it better than its competitors?
The company was created out of the portfolio re-organisation of Macquarie Infrastructure Group in 2010 and has extensive experience in operating toll roads. In addition, it is the only major toll road operator listed on the ASX with a diversified portfolio of European and American assets and a yield above 5.0%.
What do you like about its management?
An experienced senior management and board have de-risked the business since the GFC and have delivered earnings growth and strong shareholder returns since listing in 2010.
What is your target price?
Around $3.70 in the next 12 months.
At what point would you sell it?
We will review the value proposition for Macquarie Atlas Roads following the refinancing of the company’s debt.
How much has it added (subtracted) to your overall portfolio over the last 12 months?
Macquarie Atlas Roads is up around 16.2% over the past year, outperforming the broader ASX 200 benchmark, which returned 13.5%, driven by a strong performance in the past month.
Is it a liquid stock?
There would be no liquidity issues for most global and domestic investors.
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