Ahead of winning stakes in Sydney’s WestConnex toll road, return uncertainties continue to hover around the Transurban's (ASX:TCL) traffic forecasts for WestConnex.
This year in August, Transurban and its partners acquired 51% stakes in the Sydney Motorway Corporation, beating the arch rival bidder IFM investors. Transurban chief executive Scott Charlton has spent two years to add $9.3 billion motorway to the company’s stable which has been already holding seven out of nine Sydney’s toll road.
But as things got back to normal post Transurban’s biggest-ever deal, analysts caution investors on the worth of billion dollars spent on WestConnex takeover deal. Analysts points out that Transurban has missed to provide information on how many cars and trucks are expected to use the 33-Km long motorway.
CEO Charlton previously indicated that Transurban’s traffic forecasts for newly acquired WestConnex were higher than that outline by NSW government in 2015, based on potential for traffic coming on and off the motorway from proposed projects such as the Western Harbour Tunnel.
But analysts are of the view that Transurban’s traffic forecast needs to be almost 50% more than the NSW’s government to generate a return above the company’s weighted average cost of capital, which is believed to be about 7 percent.
WestConnex motorway which won't be finished until 2023, will connect with Transurban's existing M5 toll road in Sydney's southwest and will have connections to new proposed toll roads such as the Western Harbour Tunnel and the Sydney Gateway. TCL share price slipped by 0.353% to $11.300 on 12 September 2018 (6:03 PM AEST).
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