Category: Stock Market

Shares in investment banking giant Macquarie Group Ltd (ASX: MGQ) edged higher in the afternoon today and finished trading at $182 apiece.

That’s a shade off its all-time high of $183.71 which it hit in early trade this morning.

These are impressive results for the bank, which has rallied 6.5% in the last month and recovered from a previous low of $171.93 on 21 September.

Why don’t we dive in and see what’s been fuelling this growth in the Australian banking group’s share price lately.

What tailwinds are behind the Macquarie share price?

Taking a step back and looking at a wider time frame, it was a good month in September for Macquarie’s share price.

Early last month the bank gave an investor presentation detailing its outlook for the coming periods.

From its presentation, the company expects a significant increase in operating profit for the first quarter of FY22, due to the sale of some of its business segments, and strengths in others.

It did, however, say it expects a slight down-step in earnings from the second half of FY21, but that it still expects significant year on year growth in its FY22 first half results.

Aside from this, Macquarie believes it is well positioned to capitalise on tailwinds that have emerged from its investments into renewable energy.

Macquarie is a large green and renewables investor, with over $2 billion in current funding commitments on its books, and another $45 million ready to support green energy.

With this, it believes it will continue to deliver outsized returns over the coming years, as energy production and consumption trends begin to shift away from fossil fuels.

Investors have been buying the company’s growth narrative this past month, and appear to be pricing in the company’s future growth potential with this flurry of buying activity.

Can Macquarie keep it up to justify its all-time high share price?

One leading broker seems to think so. Analysts at investment firm Jeffries believe the company has the legs to outperform the consensus view at its upcoming half-year results.

Jeffries forms its view partly due to the recent turbulence in global gas markets, but also see’s strengths from Macquarie recently gaining market share in the home and business loans markets.

It also believes that with the upcoming 2021 COP26 UN Climate Change Conference just around the corner, Macquarie could be on the receiving end of favourable government initiatives that may follow the conference.

Not only that, in terms of market size, Macquarie’s total addressable market in this segment is “far bigger than (its) present $66 billion market capitalisation”, which is a bullish signal, according to Jeffries.

As such, it has a $211 price target on the Macquarie share price, implying a 16% upside potential from the last market price.

Macquarie shares are also up 41% in the last year, ahead of the S&P/ASX 200 index (ASX: XJO)’s return of around 25% in this time.

The post Why the Macquarie (ASX:MQG) share price hit its all-time high on Friday appeared first on The Motley Fool Australia.

More reading

• How did the Macquarie (ASX:MQG) share price perform in September?
• The most important catalyst for outperforming ASX shares: fund manager
• 2 compelling ASX shares that could be buys in October 2021
• How does the Westpac (ASX:WBC) dividend compare to the banking sector?
• These were the best performing ASX bank shares in September

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Bank of Queensland Limited (ASX: BOQ) share price has finished Friday in the red. However, the $6.2 billion bank’s shares hit a new 52-week high in the early hours of trade.

At the end of the session, shares in Bank of Queensland finished 0.31% lower to $9.71. Although, they had reached a high of $9.84 within 30 minutes of opening trade.

Despite the accomplishment, there’s not much news out from the company — aside from informing shareholders of the date for its annual general meeting, which is expected to be held on 7 December 2021.

With that in mind, let’s recap what has been going on recently at the Bank of Queensland, and what may lie ahead.

Upcoming full-year results

Investors have been displaying eagerness towards the BOQ share price in recent weeks. Shares have climbed as much as 7.4% in the past 16 days. This rally comes in the lead-up to the company announcing its full-year results for FY21 on 13 October 2021.

If the FY21 result from Commonwealth Bank of Australia (ASX: CBA) was anything to go by, Bank of Queensland shareholders could be in store for a solid result. For reference, the smaller bank reported its half-year results back in April — which involved impressive numbers of its own.

In its first half, the Bank of Queensland reported a 9% increase in cash earnings after tax to $165 million. Consequently, the bank declared a 17 cent per share interim dividend, which was up from 6 cents per share in 1H FY20.

Furthermore, the upcoming full-year result will be the first to include contributions from ME Bank. On 1 July 2021, the Bank of Queensland completed its acquisition of Members Equity Bank for a total cash consideration of $1.325 billion.

No doubt shareholders will be watching the FY21 result closely to get a glimpse of how the integration of ME Bank is travelling.

Bank of Queensland share price snapshot

The BOQ share price has performed exceptionally well over the past year. In fact, the smaller Aussie bank contender has outpaced the gains experienced by the big four banks.

Across the 12-month period, the smaller bank has delivered a return of 59%. Meanwhile, the next closest competitor is CBA with a gain of 54% over the same period.

The post Bank of Queensland (ASX:BOQ) share price hits 52-week high on Friday appeared first on The Motley Fool Australia.

More reading

• Top broker tips Bank of Queensland (ASX:BOQ) share price as a buy
• 5 things to watch on the ASX 200 on Wednesday
• If you invested $1,000 in Bank of Queensland (ASX:BOQ) shares a decade ago, here’s what it would be worth now
• Why Bank of Queensland (ASX:BOQ) shares are up 66% in the past 12 months
• The ASX 200 banks may be in danger as half of mortgage-stressed households have “borrowed to the hilt”

Motley Fool contributor Mitchell Lawler owns shares of Commonwealth Bank of Australia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Recce Pharmaceuticals Ltd (ASX: RCE) share price was halted today after the company made a key announcement.

Recce shares were trading 1.61% lower at 91.5 cents before being placed into a trading halt.

Let’s get into the thick of it to understand what went down today.

What’s happening with Recce Pharmaceuticals?

To understand what’s led us to this point, we have to take a step back to the start of last month when Recce issued 10,000 ordinary shares upon the exercise of unlisted options.

Normally, if securities aren’t listed, they can’t be sold until 12 months after issue – but of course, there are exceptions to the rule. Companies can just submit a few forms to disclose the issue and sale of the shares, and everyone is on their way. It’s routine practice on the ASX.

However, “due to an administrative oversight”, the company forgot to lodge the cleansing notice forms that are required under section 708A(5)(e) of the Corporations Act 2001, when issuing and then on-selling its shares last month.

Under the legislature, companies are obliged to submit a cleansing notice within 5 business days of issuing shares in certain circumstances, such as when stock options are exercised.

The aim is to in effect ‘cleanse’ the market of any information that would have otherwise been undisclosed, that also may have a material impact on a share’s price. It can also be used to lay false information to rest.

The company advised that it shortly intends to apply to the NSW Supreme Court for an extension on the time to lodge the cleansing notice. It intends to make the application on 11 October, according to the release.

Recce Pharmaceuticals share price snapshot

The Recce Pharmaceuticals share price has been swimming in a sea of red this year. It’s fallen 15% in the last 12 months, 13% since January 1, and 11.5% in the past month.

These returns have lagged the S&P/ASX 200 index (ASX: XJO)’s return of around 20% this past year.

The post Here’s why the Recce Pharmaceuticals (ASX:RCE) share price was on ice today appeared first on The Motley Fool Australia.

More reading

• Own Brickworks (ASX:BKW) shares? Here’s what you’re invested in
• Brokers name 3 ASX shares to buy today
• Which shares are set to finish the week as the top movers on the ASX 300?
• Here’s why the Rio Tinto (ASX:RIO), BHP and Fortescue share prices are surging today
• Why Clinuvel, EML, Regal, & Whitehaven Coal shares are sinking

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Brickworks Limited (ASX: BKW) is one of those S&P/ASX 200 Index (ASX: XJO) shares that you might think you can get a pretty good grip on what it does, just by the name.

Yes, Brickworks is indeed in the business of manufacturing bricks and other construction materials. It has been doing so since 1934.

But most Aussies wouldn’t be familiar with the fact that this company is doing more than just making bricks. Brickworks also has a formidable investment portfolio. This has come in handy for the company before, enabling Brickworks to smooth out the volatility and seasonality of the construction industry.

So, if you’re a Brickworks shareholder, what kind of investments do you actually own by extension?

Well, Brickworks’ main breadwinner is still its twin construction businesses in Australia and the United States. However, the company has two other pillars that it uses to supplement these primary businesses.

Brickworks shares: fingers in many pies

The first is a property business. Brickworks has made a habit of developing old property sites that it has used in the past for making bricks and other construction materials. It works in conjunction with other companies, such as Goodman Group (ASX: GMG) to monetise these assets. Its primary property interest is the Joint Venture Industrial Property Trust that it operates with Goodman, which is now worth about $633 million for Brickworks.

That brings us to Brickworks’ other ‘pillar’. That would be its ownership of ASX shares. Yes, Brickworks is an investor on the share market just as you or I may be. So, what shares does Brickworks own?

Well, its primary investment is a 39.4% stake in Washington H. Soul Pattinson and Co Ltd (ASX: SOL). Soul Patts, as it’s also known, also has a stake in Brickworks shares itself, as well as a large portfolio of other shares.

Through Soul Patts, Brickworks in turn can claim indirect ownership of those same shares, which include TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC) and BKI Investment Co Ltd (ASX: BKI). The latter is itself an old spin-off of Brickworks.

How important is this 39.4% stake in Soul Patts? Well, in its 2021 annual report, Brickworks called this investment a “core asset of Brickworks that has brought diversity and reliable earnings to the Company for more than 50 years”. 

It went on to say that “our investment in WHSP provides a cash flow stream via dividends that allows long term strategic decision making by sheltering the business during cyclical downturns”.

So, there you go. It turns out that if you own Brickworks shares, you don’t just have ownership of any old brick factory.

The post Own Brickworks (ASX:BKW) shares? Here’s what you’re invested in appeared first on The Motley Fool Australia.

More reading

• These 3 ASX 200 shares are the most popular by trading volume today
• Why do Pilbara Minerals (ASX:PLS) shares keep topping the volume charts?
• How did ASX lithium shares perform in the FY22 first quarter?
• 2 ASX 200 shares surging this week despite inflation worries
• US warns Evergrande crisis could affect ‘entire world’

Motley Fool contributor Sebastian Bowen owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Brickworks. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It has been another busy week for Australia’s top brokers. This has led to the release of a large number of broker notes.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

BHP Group Ltd (ASX: BHP)

According to a note out of Macquarie, its analysts have retained their outperform rating and $56.00 price target on this mining giant’s shares. While investors have been focusing a lot on the falling iron ore price, Macquarie highlights that strong coal prices are supporting its earnings and cash flow. In respect to the latter, the broker estimates that its shares are trading on a free cash flow yield of ~20%. This should be supportive of generous dividends. The BHP share price is trading at $37.83 today.

Pilbara Minerals Ltd (ASX: PLS)

Another note out of Macquarie reveals that its analysts have retained their outperform rating and $2.80 price target on this lithium miner’s shares. This follows news that Pilbara Minerals has begun the commissioning of the Ngungaju Plant acquired from Altura Mining. It has been in care and maintenance mode since its acquisition. Macquarie notes that this comes at a time when spot lithium prices in China remain strong and could support better than forecast earnings. The Pilbara Minerals share price is fetching $1.96 today.

Sonic Healthcare Limited (ASX: SHL)

Analysts at Morgan Stanley have retained their overweight rating and $45.50 price target on this healthcare company’s shares. According to the note, the broker has been looking at an update from its European peer, Synlab. It notes that Synlab has upgraded its guidance to reflect stronger than expected COVID-19 testing demand. Morgan Stanley feels this bodes well for Sonic and creates upside risk to its earnings estimates for FY 2022. The Sonic share price is trading at $39.85 today.

The post Brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

More reading

• Here’s why the Rio Tinto (ASX:RIO), BHP and Fortescue share prices are surging today
• These 3 ASX 200 shares are the most popular by trading volume today
• Why do Pilbara Minerals (ASX:PLS) shares keep topping the volume charts?
• How did ASX lithium shares perform in the FY22 first quarter?
• US warns Evergrande crisis could affect ‘entire world’

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 300 Index (ASX: XKO) is pushing upwards today, further adding to yesterday’s gains.

At the time of writing, the ASX 300 is up 0.83% to 7,318.5 points. This means that over the past two days, the index has risen 1.58%.

We take a look at some of the top movers on the ASX 300 today.

oOh!Media Ltd (ASX: OML)

The oOh!Media share price is on the move, up 5.6% to $1.92 despite no company announcements today.

The out of home media company has seen its shares rebound lately as Australia ramps up its COVID-19 vaccine efforts. Investors are anticipating a quick recovery for its advertising operations.

Magellan Financial Group Ltd (ASX: MFG)

Following suit is the Magellan share price, up 5.92% to $34.01.

The financial company also hasn’t provided any news to the market today. However, yesterday afternoon, Swiss investment firm provided an update on its assessment of Magellan shares.

Analysts cut their rating by 5.4% to $35.00 per share. While this is a reduction, it still implies an upside of around 3% based on the current share price.

Sandfire Resources Ltd (ASX: SFR)

The Sandfire Resources share price is travelling 4.55% higher to $5.28.

The metals company released its 180-page annual and sustainability report this afternoon, highlighting its activities throughout the year. Sandfire Resources also covered its environmental, social, and governance (ESG) obligations.

And the ASX 300 shares heading the other way?

EML Payments Ltd (ASX: EML)

Heading south is the EML Payments share price, down a sizeable 14.46% to $3.17.

The payments solutions company nosedived following a regulatory update relating to the Central Bank of Ireland (CBI).

EML Payments advised its Irish-based subsidiary, PFS Card Services business could be impacted materially. CBI has proposed certain limits be applied across the company’s almost 27,000 programs in the next week.

Australian Strategic Materials Ltd (ASX: ASM)

Also in decline is the Australian Strategic Materials share price, down 5.74% to $10.19.

The rare earth metals company hasn’t released any market-sensitive news to the ASX today. However, its shares are taking a breather from registering about a 10% gain over the past two days.

Since this time last year, Australian Strategic Materials shares have gained 270%, with year-to-date up 54%.

The post Which shares are set to finish the week as the top movers on the ASX 300? appeared first on The Motley Fool Australia.

More reading

• Why Clinuvel, EML, Regal, & Whitehaven Coal shares are sinking
• These 3 ASX 200 shares are the most popular by trading volume today
• Top brokers name 3 ASX shares to sell today
• Why Fletcher Building, Magellan, Sezzle, & Starpharma are racing higher
• Here’s why these top brokers reckon the Magellan (ASX:MFG) share price is cheap

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended EML Payments. The Motley Fool Australia owns shares of and has recommended EML Payments. The Motley Fool Australia has recommended oOh!Media Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Buying activity is picking up for depressed ASX iron ore miners like the Fortescue Metals Limited (ASX: FMG) share price on Friday.

The S&P/ASX Materials (INDEXASX: XMJ) index is up 2.05% headlined by gains from iron ore majors.

The BHP Group Ltd (ASX: BHP) share price is up 3.55% to $37.94. The Rio Tinto Limited (ASX: RIO) share price is rallying 4.12% to $100.5. And the Fortescue share price is tailing behind, up 2.88% to $14.31.

On the smaller end of town, Champ Iron Ltd (ASX: CIA) and Mount Gibson Iron Ltd (ASX: MGX) are also catching bids, up 2% and 5.75% respectively.

What’s driving iron ore miners higher?

The S&P/ASX 200 Index (ASX: XJO) might be taking off after Wall Street, as all three of its major indices posted gains of around 1%.

Consumer discretionary and materials were among the best performing sectors overnight, rallying 1.5% and 1.35% respectively.

Likewise, what’s been a choppy week for the S&P/ASX 200 Index (ASX: XJO) is coming to a bright conclusion, rallying 0.74% to 7,310 at the time of writing.

In addition, Friday marks the end of China’s week-long National Day holiday.

Iron ore prices have remained relatively flat in light of China’s public holiday. Fastmarkets reported that iron ore prices edged 0.02% higher on Thursday to US$117.02 a tonne on the back of limited trading liquidity.

But China’s most-traded iron ore futures contracts for January 2022 delivery came back surging on Friday, up 4.8% to ~760 yuan (US$117) a tonne.

China also announced some encouraging economic data with its services sector growing in September according to CNBC.

The Caixin/Markit services purchasing managers’ index (PMI) rose to 53.4 from 46.7 in August, bouncing from the lowest level seen since the height of the pandemic last year. Any figure below the 50-point mark represents a contraction on a monthly basis.

An encouraging move for Chinese iron ore pricing and positive domestic economic data after a week long break is likely fueling buying activity from iron ore juniors through to majors like the BHP and Fortescue share price.

The post Here’s why the Rio Tinto (ASX:RIO), BHP and Fortescue share prices are surging today appeared first on The Motley Fool Australia.

More reading

• Why do Pilbara Minerals (ASX:PLS) shares keep topping the volume charts?
• Is the Fortescue (ASX:FMG) dividend yield really 25%?
• US warns Evergrande crisis could affect ‘entire world’
• ASX 200 (ASX:XJO) midday update: EML crashes, mining shares rise
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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) has followed the lead of US markets and is charging higher. In afternoon trade, the benchmark index is up 0.75% to 7,311.7 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are falling:

Clinuvel Pharmaceuticals Limited (ASX: CUV)

The Clinuvel share price is down 5% to $40.14. This is despite there being no news out of the biopharmaceutical company. However, its shares are up 75% in 2021 even after this decline. In light of this, some investors could potentially be taking a bit of profit off the table today.

EML Payments Ltd (ASX: EML)

The EML Payments share price is down 15% to $3.15. Investors have been selling this payments company’s shares following an update on regulatory action by the Central Bank of Ireland (CBI). According to the release, the CBI is planning to take action against its PFS Card Services (Ireland) business. Management has warned that the potential directions “could materially impact the European operations of the Prepaid Financial Services (PFS) business.”

Regal Investment Fund (ASX: RF1)

The Regal Investment share price has fallen 4% to $4.29. This morning the company announced that it has raised $97.9 million via an institutional entitlement offer. These funds were raised at $3.79 per new share, which represents a 15% discount to its last close price.

Whitehaven Coal Ltd (ASX: WHC)

The Whitehaven Coal share price has continued its slide and is down a further 4.5% to $3.19. Investors have been selling this coal miner’s shares this week after thermal coal prices weakened. According to CommSec, on Wednesday night the thermal coal price fell a sizeable 10.2% to US$242.00 per tonne. It then followed this up with 4.2% decline to US$231.90 per tonne during overnight trade.

The post Why Clinuvel, EML, Regal, & Whitehaven Coal shares are sinking appeared first on The Motley Fool Australia.

More reading

• These 3 ASX 200 shares are the most popular by trading volume today
• ASX 200 (ASX:XJO) midday update: EML crashes, mining shares rise
• EML (ASX:EML) share price plunges 13% following regulatory update
• How did ASX fintech shares perform in the FY22 first quarter?
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended EML Payments. The Motley Fool Australia owns shares of and has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) looks like it will end the trading week on a positive note this Friday. At the time of writing, the ASX 200 is up a healthy 0.76% to 7,308 points.

But let’s dig a little deeper and check out which ASX 200 shares are topping the charts today in terms of trading volume, according to investing.com.

The 3 ASX 200 shares most heavily traded today

Whitehaven Coal Ltd (ASX: WHC)

Our first ASX 200 share is the coal miner Whitehaven. So far today, Whitehaven has seen a hefty 16.02 million of its shares traded.

There are no major news pieces or announcements out of the company today, so we can probably put this high volume down to movements in the Whitehaven share price.

The company has taken a mighty beating today, with Whitehaven shares down by 4.49% to $3.19 at the time of writing. This is the probable cause of the elevated trading volumes we are seeing.

EML Payments Ltd (ASX: EML)

Our second ASX 200 share makes a rare guest appearance on the list. EML Payments has seen a sizeable 17.81 million of its shares bought and sold so far today. We can almost certainly lay the blame for this at the feet of EML’s market-moving announcement this morning.

EML told investors that its Irish subsidiary PFS Card Services is facing further regulatory pressure from the Central Bank of Ireland.

This has seen the company lose a massive 14.32% from its share price so far today, with EML shares asking $3.17 apiece at the time of writing. It’s no surprise such a large share price loss has seen so many shares traded this Friday.

Pilbara Minerals Ltd (ASX: PLS)

Our third and final ASX 200 share today is none other than lithium producer Pilbara Minerals, a frequenter of the ASX 200’s top volume spot. Pilbara has seen a whopping 24.03 million of its shares swap hands so far today. No news is out from the company so far.

However, Pilbara Minerals seems to be having the same problem as EML, albeit on a far smaller scale. Pilbara shares are currently down by a not-insignificant 2.3% today to $1.95 a share. This is probably the reason behind so many shares trading today.

The post These 3 ASX 200 shares are the most popular by trading volume today appeared first on The Motley Fool Australia.

More reading

• Why Clinuvel, EML, Regal, & Whitehaven Coal shares are sinking
• Why do Pilbara Minerals (ASX:PLS) shares keep topping the volume charts?
• How did ASX lithium shares perform in the FY22 first quarter?
• 2 ASX 200 shares surging this week despite inflation worries
• US warns Evergrande crisis could affect ‘entire world’

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended EML Payments. The Motley Fool Australia owns shares of and has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Transurban Group (ASX: TCL) share price has fallen by 3% since 4 October 2021, with that decline occurring with a string of consecutive days of declines.

Whilst there haven’t been any material announcements this week, Transurban did make a major announcement on 20 September 2021.

WestConnex acquisition

A few weeks ago, Transurban announced that Sydney Transport Partners (STP) will acquire the remaining 49% of WestConnex from the NSW Government for $11.1 billion. After the deal is done, STP will own 100% of WestConnex.

If you’re wondering what Transurban’s relationship with STP is, the ASX share owns half of the business, alongside strategic partners, including new partner Caisse de depot et placement du Quebec.

WestConnex has almost 40 years of concession life remaining.

The additional ownership in WestConnex, including the extension of the M5 West concession from 2026, extends Transurban’s weighted average concession life to approximately 30 years.

Transurban said that WestConnex’s free cash generation, underpinned by “strong asset fundamentals” with potential upside from future infrastructure development and economic growth across Greater Sydney, is expected to support long-term group free cashflow generation and distribution for investors.

To fund the acquisition, Transurban said it was going to raise $4.22 billion at a Transurban share price of $13, which was an 8.3% discount to the previous closing price of $14.18.

The toll road operator also referenced capital releases. It currently expects to receive more than $600 million of potential capital releases until FY25 resulting from its increased stake in WestConnex. This is on top of more than $2 billion of potential capital releases expected to be achieved between FY21 and FY25 from a number of assets across Transurban.

Management are expecting the acquisition to add to free cash per security over the near-term, medium-term and long-term when including capital releases. In the near-term, it’s expected to be slightly dilutive when excluding capital releases because of the timing of the acquisition and capital raising.

How big is WestConnex?

Transurban pointed out that WestConnex is one of the largest road infrastructure projects in the world with an enterprise value of $33 billion.

It will form an approximate 70km network linking Sydney’s west with the Sydney CBD, Sydney Airport and Port Botany. By 2031, 40% of the Sydney population is expected to live within 5km of WestConnex.

Construction is nearing completion with 82% of projected capital expenditure spent to date.

Transurban said WestConnex is expected to benefit from traffic uplift from future road infrastructure investment across Sydney, including new major projects which will link into the asset over time.

Distribution guidance

Transurban provided distribution guidance for the six months ending 31 December 2021 of $0.15 per security. This compares to a $0.15 per security distribution for the first half of FY21.

Free cash for the first half of FY22 could be higher or lower than the distribution guidance because of COVID-19 uncertainty. The total FY22 distribution is still expected to be in line with FY22 free cash, excluding capital releases.

Including that interim distribution guidance and the final distribution from FY21, that puts the distribution yield at the current Transurban share price at 2.6%.

The post Why is the Transurban (ASX:TCL) share price struggling lately? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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