AUS
NZ
UK
CA
USA
IND
In the midst of a market correction, opportunities arise for value buying in ASX industrial stocks that are typically considered less affordable. Transurban Group (ASX: TCL) shares have caught the attention of experts due to the recent market sell-off, offering a level of value that is not commonly associated with this stock.
Transurban shares, currently trading at $12.10, have experienced a 1.3% increase at the time of writing, marking a change from the broader market trend.
Transurban's Unexpected Appeal
The S&P/ASX 200 Index (ASX:XJO) has seen a decline of 7% over the past three months, which has also impacted Transurban shares, causing a 15.5% drop during the same period. This market correction has prompted experts to view Transurban as an attractive investment opportunity, particularly when considering its valuation.
Sarah Shaw, the Chief Investment Officer at 4D Infrastructure, commented on the value proposition that Transurban now presents, a sentiment not commonly associated with this stock. In a statement to the Australian Financial Review (AFR), Shaw highlighted the significance of this shift in perspective:
"I'd never normally say this – just because normally it doesn't offer this level of value – but Transurban has become a top 10 position for us, and it hasn't been a top 10 position for us in eight years. I've never really been able to push it before because it just hasn't offered the value that it is offering today."
Expert Opinions Align
Other experts in the field also share Shaw's views on the attractiveness of Transurban as an investment. Atlas Funds Management pointed out that Transurban is currently trading at a 25% discount to its pre-COVID share price, despite experiencing increased traffic volumes and higher toll prices due to inflation indexing.
Citi analysts, in line with this sentiment, have issued a buy rating on Transurban stock, with a 12-month share price target of $15.90. This implies a potential 31% upside for investors considering entry at the current valuation. Citi analysts are particularly optimistic due to the strong EBITDA growth outlook, projecting a compound annual growth rate of approximately 12% between FY24 and FY26.
Reasons Behind the Bargain
The Transurban share price, like many other ASX 200 stocks, has suffered from the recent market downturn. A market is considered to be in an official correction when it has declined by over 10% from its most recent peak. The ASX 200 crossed this threshold on October 30, trading 10.1% below its February 52-week high.
In recent news, Transurban reported its highest-ever quarterly average daily traffic of 2.5 million trips per day. The company also reaffirmed its FY24 distribution guidance of 62 cents per share, signaling an approximate 7% increase from FY23.
Furthermore, the company announced a $250 million notes issue and a $220 million loan facility. Notably, Michelle Jablko assumed the role of Transurban CEO and managing director, receiving additional performance awards and holding 67,169 Transurban shares directly.
In conclusion, Transurban Group offers investors an unexpected value opportunity in a correcting market, making it a stock worth considering for those looking for potential long-term growth and attractive valuations.
