Atlas Arteria Limited (ASX:ALX)

Graeme Bevans
CEO
Market Cap (AUD): 5.31B
Sector: Industrials
Last Trade (AUD): 7.92 +0.15 (+1.93%)
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1. About

ALX is a global infrastructure developer and operator, with a current portfolio of four international toll roads.

The Company to deliver growing distributions and enhance the value of its portfolio for security holders.

ALX's primary focus remains on supporting organic growth within its existing portfolio assets, which are well positioned to benefit from further improvements in the underlying economic conditions in France and the United States. ALX commenced payment of distributions in April 2013 and has since provided security holders with a growing distribution profile.

2. Business model

 

The Group operates the following divisions:[1]

 

Divisions

Revenue  ($’000)

% of Revenue

% of Profit (before Int, Tax, Depn & Amort)

Profit drivers[2]

APRR

$751,765

85.6%

84.4%

  • Total revenues increased 4.2% to €2,425 M in 2017, driven by traffic growth, toll increases and a more favourable traffic mix
  • APRR EBITDA increased 5.3% producing another record EBITDA result
  • Automated transactions represented 98.9% of total transactions, with the number of Electronic Toll Collection (ETC) devices increasing 9.8% to approximately 2.5 M in 2017

ADELAC

$16,787

1.9%

2.1%%

  • Traffic performance underpinned by increased weekday commuter usage
  • Performance attributed to traffic growth and higher tolls
  • Improved EBITDA margin of 82.2% (2016: 81.3%)

Dulles Greenway

$98,105

11.2%

12.2%

  • Traffic decreased 1.3%2 in 2017, largely impacted by changes to the surrounding local network.
  • Revenue increased 1.3% and EBITDA increased 1.1% in 2017, primarily attributable to toll increases during 2017

Warnow Tunnel

$11,574

1.3%

1.3%

  • Through traffic growth reflective of increased usage and construction activities on competing routes
  • Performance supported by higher traffic and toll increases in 2017
  • Improved EBITDA margin of 70.9% (2016: 70.4%)

3. Strategy

 

ALX's strategy is to deliver growing distributions and enhance the value of its portfolio for securityholders. The Company seeks to invest in global infrastructure assets that generate stable cash flows and offer resilient long-term performance through economic cycles.[3]

Key actions to deliver on its strategy include

  • Active management to drive corporate and operational performance and efficiencies
  • Efficient and disciplined capital and portfolio management
  • Delivering and growing distributions from portfolio assets
  • Investing in accretive, complementary growth opportunities

4. Markets

 

The Group operates in markets including:[4]

 

Industry (Australia)

Industry Revenue (2018)

Growth Rate (annual 13-18)

Road and Bridge Construction

$29 billion

2.1%

Toll Road Operators

$3 billion

3.7%

5. Competition

 

Major competitors include:[5]

 

  • Goldman Sachs Group Inc (NYSE: GS)
  • Deutsche Bank AG (USA) (NYSE: DB)
  • Citigroup Inc (NYSE: C)

6. History

 

2010[6]

MQA’ lists on  the Australian Securities Exchange (ASX)

MQA commences trading on the ASX at A$0.51 following the demerger of Macquarie Infrastructure Group into two separate ASX-listed toll road groups

 

2011   

MQA delivers 148% security price growth one year following its listing

 

2012   

Eiffarie refinances and reduces its €3.8 billion acquisition debt facility to €2.8 billion, ahead of maturity, stabilising the APRR/Eiffarie capital structure and facilitating distributions to MQA and its co-investors

Fitch initiates coverage of APRR with a BBB+ long-term credit rating with Stable Outlook

 

2013   

MQA declares its first distribution

S&P upgrades APRR’s long-term credit rating to BBB with Positive Outlook

 

2014   

MQA completes its first capital raising, funding the acquisition of an additional 0.7% indirect interest in APRR via an institutional placement

S&P upgrades APRR’s long-term credit rating to BBB+ with Stable Outlook

 

2015   

APRR signs a €1.8 billion Revolving Credit Facility and Eiffarie refinances and reduces its debt facility to a €1.5 billion term loan, securing significant interest savings

MQA reaches financial close on the transfer of its 25% interest in the Indiana Toll Road in the US, receiving net proceeds of US$25 million

APRR and AREA formalise a significant agreement with the French State, including a capital investment Stimulus Package, concession amendments, and extensions, as well as supplemental toll increases

 

2016   

The Tunnel Maurice Lemaire (TML) Concession merges with the APRR Concession in exchange for a 10-month extension to the APRR Concession

MQA reaches financial close on the sale of its 22.5% interest in the Chicago Skyway in the US, receiving net proceeds of approximately US$98 million

AREA, a subsidiary of APRR, enters into an agreement to acquire an additional 46.1% interest in ADELAC, which, following subsequent acquisitions of minority interests, increases MQA’s indirect interest in ADELAC to 19.74%

 

2017   

MQA announces the acquisition of the remaining 50.0% estimated economic interest in the Dulles Greenway, taking its estimated economic interest to 100% 1. The transaction was funded via an institutional placement, share purchase plan, asset finance facility and corporate cash

MQA is included in the S&P/ASX 100 Index as a result of increased free float market capitalisation

MQA divests its nominal interest in the M6 Toll in West Midlands, UK

MQA announces the acquisition of an additional 4.86% interest in APRR via MAF2, increasing its ownership in APRR to 25.0% and total ownership interest in ADELAC to 25.03%. The transaction was funded via an entitlement offer and acquisition debt facility

Fitch upgrades APRR’s long-term credit rating to A- with Stable Outlook

The MQA Boards announce their intention to transition MQA to an internalised management structure

 

2018   

Atlas Arteria confirms that the ASX listing code for Atlas Arteria’s dual-stapled securities has changed from MQA to ALX effective from Monday, 28 May 2018

7. Team

 

Australian Board (ATLAX)[7]

 

Nora Scheinkestel – Independent Chairman

Richard England – Independent Director

Debbie Goodin – Independent Director

David Bartholomew – Independent Director

 

Bermudian Board (ATLIX)

 

Jeffrey Conyers – Independent Chairman

James Keyes – Independent Director

Derek Stapley – Independent Director

 

Management Team

 

Graeme Bevans – Chief Executive Officer

Nadine Lennie – Chief Financial Officer

Vincent Portal-Barrault – Chief Operating Officer

Clayton McCormack – General Counsel & Company Secretary


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8. Financials

 

2018 Half Year Results Presentation

 

Financial Year 2016/17 (ended 31 December):[8]

 

Divisions

Revenue ($’000)

% Change

Profit (before Int, Tax, Depn & Amort) ($’000)

% Change

APRR

$751,765

7.8%

$550,960

9.2%

ADELAC

$16,787

0.0%

$13,785

0.0%

Dulles Greenway

$98,105

59.2%

$7,998

6.4%

Warnow Tunnel

$11,574

3.8%

$8,196

2.5%

Total

$878,231

14.0%

$652,846

16.1%

9. Risk

 

Major risks include:[9]

 

Financial risk management

 

Market Risk

Foreign Exchange Risk

Foreign exchange risk Foreign exchange risk arises when recognised assets and liabilities and future commercial transactions are denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The Groups operate internationally and are exposed to foreign exchange risk mainly arising from currency exposures to the Euro (“EUR”), Pound Sterling (“GBP”) and the United States Dollar (“USD”). The Groups do not hedge the foreign exchange exposure on overseas investments. Financial instruments are converted to Australian Dollars (“AUD”) at the rate of exchange ruling at the financial reporting date. Derivative instruments are valued with reference to forward exchange rates from the year end to the settlement date, as provided by independent financial institutions.

 

Interest Rate Risk

The Groups have no significant interest bearing assets and liabilities whose fair value is significantly impacted by changes in market interest rates.

 

Credit Risk

Potential areas of credit risk consist of deposits with banks and financial institutions as well as receivables from associates and governments. The Groups limit their exposure in relation to cash balances by only dealing with well-established financial institutions of high-quality credit standing. With the exception of the transactions between MARIL and MARL, the Groups transact with independently rated parties with appropriate minimum short term credit ratings. The Boards set exposure limits to financial institutions and these are monitored on an ongoing basis. Sound credit risk management involves prudently managing the risk and reward relationship and controlling and minimising credit risks across a variety of dimensions, such as quality, concentration, maturity, and security.

 

Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Groups have a liquidity management policy which manages liquidity risk by monitoring the stability of funding, surplus cash or highly liquid cash assets, anticipated cash in and outflows and exposure to connected parties.