Atlas Arteria: Q3 rebound in APRR traffic

About the author:

Nathan Lead
Author name:
By Nathan Lead
Job title:
Senior Analyst
Date posted:
21 October 2021, 8:30 AM
Sectors Covered:
Infrastructure, Utilities

  • The rebound in APRR traffic back to trend was a highlight of the Q3 data.
  • We retain an ADD rating on ALX and 12 month target price of (login to view).
  • The strength of Q3 traffic increases confidence in our rapid DPS growth forecast.


ALX released its Q3 traffic and toll revenue data. The APRR’s traffic was above pre-COVID levels, while the Dulles Greenway continued to suffer.

Revenue was stronger for both key roads (APRR, Dulles Greenway) than we had assumed.


Traffic on the APRR (ALX 31%) was +6% (light vehicle traffic +7%) above the 2019 pcq (i.e. above the pre-COVID level), delivering toll revenue growth of +6.7%. This was a solid beat of our +c.2% revenue growth assumption for the quarter.

We note peer autoroutes owner VINCI reported c.5% increase in Q3 revenue on the 2019 pcq driven by c.4% traffic growth. ALX noted leisure travel remained high during the European summer into September, with strong demand from French domestic travelers. c.80% of the French adult population are fully COVID vaccinated.

It’s difficult to have conviction on the sustainability of the Q3 traffic strength on the APRR. Q3 could be a catch-up spike (car travel supported by a EU digital vaccine passport being required for any travel by plane, train or bus in France) or it could be a return to the seasonal trendline. We assume the first option (with traffic returning to trend by CY23), albeit have lifted our short-term forecasts to reflect Q3 forecast outperformance (as we have also done for the Dulles Greenway).

Revenues on the Dulles Greenway (ALX ~100% economic interest) continued to suffer (-28% on 2019 pcq), as a result of -30% decline in traffic vs 2019. Hence, still a long way to go to recover to pre-COVID levels. Weekday traffic was c.33% below the 2019 pcq, so traffic recovery requires businesses returning to the office.

Forecast and valuation update

In its Q3 report VINCI said of its French autoroutes network: “Given the good trend in traffic levels observed in recent weeks and following on from the increase seen in the third quarter, [the business] now anticipates revenue close to that of 2019.” Our forecast for the APRR implies FY21 revenue c.3% below FY19.

Our earnings forecast uplift in local currency is <5% and adjusting for higher AUDEUR and AUDUSD over recent days reduces this improvement.

Target price remains (login to view), with asset improvement offset by the higher FX.

Investment view

ADD given c.9% potential 12 month TSR and c.8% pa equity IRR over the next five years at current prices.

Note that the bulk of the potential return over the next 12 months is predicated on our DPS forecast of 44.25cps (delivering 6.9% cash yield at current prices) and growing further over subsequent years. This DPS outlook is dependent on sustained traffic recovery.

Our NPV-based valuation of ALX peaks in 2024 at $6.76/sh, before decaying through to the APRR’s concession expiry in 2035.

Price catalysts

Next key data point is the France CPI for October 2021 (feeds into the APRR’s 2022 toll escalation calculation). We assume CPI of c.1.2% but recent monthly CPI data suggests this may be too low. 

A value accretive package of major APRR capital works agreed with the French State, albeit ALX has indicated this is unlikely until after the presidential elections in 2022.


Traffic growth and toll escalation.

Capital value decline given the APRR’s concession expires in 2035 (asset debt is required to be fully repaid before this expiry). 

Capital investment activity, including M&A and capital/debt restructuring of the Dulles Greenway.

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

Solid top-line outcome: BAP’s 1Q22 revenue was flat on the pcp, an extremely resilient result given the extent of lockdowns in the period (~70% of stores impacted) and the strength of the pcp (cycling 27% growth). Composition comprised: Trade +2%; NZ -10%; Retail -12%; and Specialist Wholesale +7%. Overall, BAP stated that non-lockdown areas are outperforming expectations. ▪ 1Q22 trade & retail: Trade/Burson revenue was up +2% on the pcp (LFL sales - 1%; cycling 8% pcp); NZ/BNT revenue was down -10% (LFL sales -15%; cycling +4%); and Retail/Autobarn revenue was down -12% (LFL sales -16%; cycling +36%). Within the Retail segment, online sales were +80% on the pcp. Stores percentages impacted by lockdown were: Trade 70%; NZ 100%; and Retail 50%. ▪ Specialist segment results: Specialist wholesale revenue is up 7% on pcp, with Auto electrical/Truckline divisions ‘performing strongly’; and WANO underperforming. ▪ GM pressure expected to be temporary: BAP stated GM was stable across Wholesale and NZ (45% of FY21 revenue); and down ~50bps Trade and Retail (~55% of FY21 revenue), driven by promotional and online pricing in lockdown areas (we assume no margin pressure witnessed in non-lockdown areas). BAP expect margins to revert once lockdowns ease. ▪ The cost base has increased vs pcp, a function of duplicated DC costs (commencement of new VIC DC), and higher group and team member support (covid related) costs. BAP noted FY22 store rollouts and refurbs are on track.

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