Lockdown II: Sydney Airport, Transurban Shares Under Discussion

  • Jul 10, 2020 AEST
  • Team Kalkine
Lockdown II: Sydney Airport, Transurban Shares Under Discussion

Summary

  • Outbreak of new infections in Melbourne forced policymakers to place the city into a lockdown of six weeks, which also includes border closure with neighbouring states and freezing economic activity in Melbourne, the capital city of Victoria.
  • Reports suggested lacklustre control at quarantine facilities added to COVID 19 woes of the city. Healthcare authorities have now seen cases where they could not trace the source of the virus, indicating signs of community transmission.
  • In its latest forecast, OECD has provided outcome considering two scenarios being single lockdown and double hit. In both cases, the body projects Australia’s unemployment rate over 7% by the end of 2021.

Melbourne has put brakes on Australia’s revival after a serious outbreak of COVID 19 in the country’s second largest city. Rising cases in suburbs of the city forced policymakers to implement strict lockdown in the city for a six-week period. Virus spread has been deteriorating in Victoria recently, as cases continue to mount in the state.

It is being alleged that virus outbreak started from the leaks in hotels, which have been identified as a major source of escalation in the new infections. People arriving in Australia from other nations are required to self-isolate them for a period of 14 days in hotels under supervision.

A lot of news has been floated on how quarantine rules were broken in hotels, which might have led to these outbreaks in Melbourne. People who were working in hotels have contracted virus and infected their family members as well.

Premier Daniel Andrews launched a judicial enquiry into the quarantine programs. Security firms engaged in hotel quarantine have found them under the scanner, as reports are alleging that security firms broke the protocol.

Police of the city prepared for enforcing the lockdown, while interstate travel with Victoria was suspended by other states. On Tuesday, 7 July 2020, when Mr Andrews announced lockdown in the city - the number of new infections was 191 - the highest number since pandemic hit Australia.

Under the lockdown rules, people movement is allowed for essential reasons like work, exercise, and shopping for food/necessities. Schools in the city have now returned to distance learning, and restaurants only have take-away services.

Related: Australia Covid-19 restrictions, What is allowed and what is not

Lockdown in the city has been implemented after twelve hotspots in the city were pushed with lockdowns for a week. Prior to this resurgence of new infections, Australia had been among the countries that controlled the spread of virus effectively.

Healthcare authorities and ruling Government of the state are now cognizant of the fact that community transmission is showing its effects, as some cases could not be traced, forcing Mr Andrews to implement lockdown and control the further spread of virus.

Neighbouring states are also taking cautious stance since it may take days for virus to emerge even after infection took place weeks back. Australia’s hotel quarantine capacity is also running at full swing, and further arrivals may need additional thoughts by the federal policymakers.

A six-week lockdown will hit the economic activity of the city, state, and the country. During this period, several people would see their jobs going back to furlough, as lockdown is back again. Victoria is a key contributor to the national GDP of Australia, and Melbourne being Victoria’s capital city, speaks volume of the potential damage.

Must Read: World's Battle Against COVID-19 Seems Far From Over

OECD has recently released projections that have considered a two-time hit to the economy due to the virus. It estimated that a double-hit COVID 19 crisis would increase the unemployment rate to 9.1% by December 2020, which is expected to remain at this level until mid-2021.

A single-hit scenario estimate was 8.3% unemployment in December 2020, which would come down to 7.7% by mid-2021. Either way, the body expects unemployment to remain elevated in the country, as a single-hit scenario is expected to result in 7.4% unemployment at the end of 2021, while the other scenario would lead to 8.4% unemployment.

Transurban Group (ASX:TCL)

Recently, the group announced that M8 was opened. M8 was earlier known as New M5. The group also started tolling on M5 East on 5 July 2020. It was highlighted that M8 would help to relieve traffic on M5 East, which is one of the most congested routes in Sydney.

Opening of M8 is consistent with the development of WestConnex project, which would provide motorists with a decongested 33-kilometre motorway. The group highlighted that people could save up to 30 minutes while travelling from Liverpool to Southern CBD.

In June, the group announced that Westlink M7 would issue 10-year senior secured medium-term notes to raise $155 million. NorthWestern Roads Group, which is 50% owned by TCL, includes M7 and was created to develop the NorthConnex project.

On 10 July 2020 (AEST 12:44 PM), TCL was trading flat at $13.730.

Sydney Airport (ASX:SYD)

Sydney Airport has been witnessing a drastic decrease in the number of passengers. In response to COVID 19, the management addressed liquidity and cashflow requirement to the end of the calendar year 2021.

At the AGM 2020, SYD management highlighted to have secured an additional $850 million of two year and three-year bank debt facilities. SYD has liquidity to cover debt maturities until the end of the calendar year 2021.    

It was highlighted that there are no intentions to raise equity presently. SYD did not declare an interim dividend. For the 12 months from April 2020, the airport is targeting capital expenditure between $150 million and $200 million – which is over half of the previous guidance.

On 10 July 2020 (AEST 12:50 PM), SYD was trading at $5.410, up by 0.933% from the previous close.

 


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