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Atlas Arteria – Market Update And Impact Of COVID-19 On Distribution

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Atlas Arteria (ASX: ALX) is a global owner, operator and developer of toll roads, with a portfolio of four toll roads in France, Germany and the United States. Atlas develops, operates and invests in roads to benefit communities through reduced travel time, greater time certainty, reduce fuel consumption and carbon emissions. Atlas has a market capitalisation of A$4.53 billion.

 

Atlas-Arteria


Update on Coronavirus

The coronavirus (COVID-19) was first reported from the Wuhan province in China on 31 December 2019. The Department of Health announced a total of 389,900 confirmed cases and 17,600 deaths globally. As of Wednesday (25 March 2020), there have been 2,252 confirmed cases and 8 have died of COVID-19 in Australia.


Update on share price

In the last month, Atlas’s share price has fallen by 37%. Atlas is currently trading at A$5.16. The downward trend is due to the outbreak of Coronavirus and its impact on traffic.


How Coronavirus effects Atlas?

Due to the outbreak of Coronavirus and its impact on traffic performance it has had significant implications on Atlas’s toll roads in France and the United States.

Firstly, the French Government implemented several measures in response to COVID-19 involving the cancelation of large gatherings and limitations to all non-essential travel which directly affects Atlas toll road in France, the APRR. In addition, Atlas forecasts further traffic announcements as a means for the French Government to tighten containment measures. Consequently, March traffic on the APRR has been impacted by the actions of the progressive French and global containment measures when comparing to the previous corresponding year. However, as reported on 27 February 2020, APRR toll road now has a €$2.0 billion revolving credit facility (undrawn) which matures in 2025 and possessed €1.7 billion in cash on 31 December 2019.


Secondly, the United States Government has implemented several measures including closing its borders to all foreign nationals and encourage all US residents to cancel non-essential travel in response to COVID-19. However, in states such as Virginia, where Atlas owns a Toll road, the Dulles Greenway, the governor announced on Tuesday (17 March 2020) that bars, restaurants, schools, gyms and theatres to reduce their capacity to ten patrons or close. Consequently, March traffic on the Dulles Greenway has decreased compared to the previous corresponding year. However, despite containment measures enforced in Virginia, Dulles Greenway retains a strong liquidity perspective. As reported on 31 December 2019, Virginia toll road possessed U$215 million of cash on the balance sheet of which U$79.3 million was available for distribution.


What is the outlook for Atlas?

Given the uncertainty of the situation, on Monday (23 March 2020), Atlas announced to defer any announcement of an H2 2010 distribution. Consequently, this results in Atlas suspending the guidance for H1 2019 distribution. Depending on the duration of the pandemic concerning lockdowns, stay-at-home and reduced public gathering orders across Europe and the United States, management will advise using funds that would have been previously distributed to shareholders, to either pay debt facilities or pay the H2 2019 distribution.


On a positive note, Atlas remains well positioned in terms of liquidity as the business possesses A$340 million cash following receipt of the dividend.


 

Disclaimer:


This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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