CEU is attracting more investor interest now that fears of the GFC are receding and stock fundamentals are reasserting themselves. CEU opened for traffic in June 2008 and was just 75% of PDS . And then the dire predictions of the GFC started to sink into investor consciousness. In short anything that had a toll to pay and was vehicle related was anathema. The anti road lobby and public transport lobby was ecstatic. Soon the vehicle would be a dying dinosaur and toll roads living museums of a bygone age. And so CEU SP waned and waned. As did MIG, and TCL and other world toll road companies like Cintra etc. The End play had begun. Throw in peak oil and that was the last nail.
But just as the body was to be interred there was a RESURRECTION of sorts.
All of a sudden the GFC is not the ogre it was painted. In fact the RBA reckons this is going to be very mild. So it is back to the fundamentals of Eastlink. And they are: 1. 45% of Melbourne’s working population resides in its corridor. 2. They are two or three car families. This factor is quite significant. 3. Reliable public transport is non-existant in the area. 4. There are and now most likely never will be public transport in the area. When they could get it in the GFC, now there is NO CHANCE. 5. The car is still the reliable mode of transport. It is costly, but there is concentrated energy on addressing this fact. LNG and lithium batteries are often mentioned in this context. 6. We will be living in an INFLATION environment. But CEU is INFLATION PROTECTED. 7. Various regulatory initatives favour channeling traffic on EASTLINK a. BUS only routes on competing roads b. improved connectivity with adjoining arterial roads, with the proposed development of Peninsula Link. c. Cost cutting now that the road is opened and logistics are in place for TAGS etc d. Improving economy. ATM business is finding CEU a boon. And this is set to continue when the massive development projects along its path are iniated and completed. Just look at what the Westlink has done for Western Sydney economy. 8. Traffic. The July figures were a big improvement on PCP. And anecdotal evidence suggests that the latter weeks of July were very encouraging. 9. Long dated investment. The original attraction of an annuity type return will return. At the moment Mr Market is focusing on the 1.5B of debt. 10. With present figures CEU has 1.3 ICR, which is tight, but should loosen. 11. CEU is INTERNALLY managed. This is something investors want. There is no leakage of fees. 12. There is no potential conflict of interest between management and shareholders like there is in MIG, ie growing the number of toll roads to attract higher base fees based on company size. 13. CEU is an one road toll road by its constitution 14. An increasing number of analysts are putting CEU on their radar. And there is TCL , always waiting to pounce. The financial synergies are compelling. 15. CP2 owns 27% of CEU at a cost 55c and they are VERY HAPPY. 16. If allowed to grow on its own CEU will be another Hills Motorway which was untimately sold for $11 17 CEU ITS TIME
CEU Price at posting:
38.3¢ Sentiment: Hold Disclosure: Held
