TRANSURBAN GROUP Financial Analysis

This assignment requires an in-depth analysis of Transurban Group's Statement of Cash Flows for the fiscal years ending June 2017 and 2016. Students need to examine the cash flows from operating, investing, and financing activities, understanding the company's financial performance and cash management strategies over these periods. The provided data includes key figures like net cash provided by operating activities, investments in property, plant, and equipment, debt issued, dividend payments, and the effect of exchange rate changes.

Running Head: Finance For Business
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Project Report: Finance for business

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Contents
Introduction.......................................................................................................................3
1. Description of company...........................................................................................3
2. Ownership governance structure.............................................................................3
3. Performance Key ratios...........................................................................................4
4. Changes in stock price.............................................................................................6
5. Significant factors....................................................................................................7
6. Calculation of CAPM and beta values.....................................................................7
7. WACC calculations.................................................................................................8
8. Debt ratios................................................................................................................9
9. Dividend policy........................................................................................................9
10. Recommendation and Conclusion.........................................................................10
References.......................................................................................................................11
Appendix.........................................................................................................................12

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Introduction:
This report has been prepared to evaluate the performance and the valuation of
TRANSURBAN GROUP (TCL). For this process, various business finance tool has been
measured. The main objective of this report is to evaluate the position of the company in the
market and the investment opportunity, risk and the return from the company.
1. Description of company:
The company is operating its business since 1996. The company manages and operates
its business in developing the urban toll roads. The main network of the business in is North
America and Australia. The company has registered its securities in the Australian stock
exchange. The company is one of the largest companies of Australian market and according
to the ASX, it falls into the category of top 20 companies of Australian market. Current 1500
people are employed by the company and the turnover of the company is quite impressive
(About us, 2018).
2. Ownership governance structure:
Ownership structure of the company is as follows:
a) Main Substantial stakeholders:
Annual report of the company explains that there is only one shareholders of the
company who has more than 20% stock of the company. The stockholder is a company and it
does not have any direct connection with the company and the members of the company.
Further, it has been evaluated that there are 4 stockholders who has more than 5%
stocks of the company. Further, the rest top 16 stockholder of the company has less than 5%
stock of the company.

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Figure 1: Top twenty shareholders
(Annual Report, 2018)
b) Main people:
i) Mr Chatfiled is the chairman of the company and he is also providing legal
services to the company.
ii) Lindsy Maxsted is the BOD member of company.
iii) Scott Chariton is the CEO of the company.
iv) None of the stockholder who is holding more than 20% stock in the company
is related with the members of the company (AFR, 2018).
v) None of the members have more than 5% ownership in the company.
3. Performance Key ratios:
Following is the study of few ratios which would describe about the performance
position of the company:
Return on assets:

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Return on assets (ROA) of the company would explain about the total profit which
has been calculated against the total profit of the company. It is 0.9% which is quite lower.
Return on assets= NPAT/ total Assets
209000000/23323000000
0.90%
Return on equity:
Return on equity (ROE) of the company would explain about the total profit which
has been calculated against the total equity of the company. It is 4.65% which is quite
moderate.
Return on Equity=
Net profit after tax/
ordinary equity
209000000/4495000000
4.65%
Debt ratios:
Debt ratio of the company would explain about the total liability which has been
maintained against the total assets of the company. It is 36.82 % which explains about the
36.82% debt of the company.
Debt Ratios = Total Liabilities/
total assets
66256/179939
36.82%
(Annual Report, 2018)
EBIT / TA * NPAT / EBIT * TA/ OE = NPAT / OE

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(923000000/23323000000)*(209000000/92300
0000)*(23323000000/4495000000)=
209000000/4495000000
4.65% 4.65%
(Morningstar, 2018)
Phenomenon TA/OE:
Further, the phenomenon total assets and total equity explains about the impact on the
profitability position and the ROA and ROE ratio of the company. It explains that the few
changes into the assets and equity would largely impact on ROA and ROE of the company.
The higher assets and equity level would lower the ROA and ROE of the company.
ROA and ROE:
Further, Roe of a company would always be greater than the ROA of the company
because assets of an organization could not be higher than the equity of the company. If the
equity would be raised by the company than the total assets of the company would be higher
and thus the ROE is always greater.
4. Changes in stock price:
The stock prices movement of the company is as follows:
Figure 2: Changes in stock price
(Yahoo Finance, 2018)
Report:

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Figure 2 explains that the stock price of TCL is quite lower than the stock price of
AORD. The correlation of both the stock is 0.66 which explains that the movement in the
stock price of the company is almost similar. The prices of TCL impact on the AORD prices.
5. Significant factors:
The reports, news and fianncial analyst report epxlains about the stock price of the
company and the reasons due to which the stock price of the company has been lower. The
stock price of the company has been lowered due to various factors. Such as, on 30-6-2016,
the stock price of the company has enjoyed a growth of 6.96% due to macro economical
factor changes (FT, 2018). Further, 8.14% increment has been enhjoyed by the compay on
31-1-2017 due to industry factors (AFR, 2018). Further, the deduction on 31-5-2017 is due to
Law suit failure and on 31-8-2017, stock price haas been chnaged due to internal changes into
the company (Bloomberg, 2018). The chnages into the stock price has taken place on 30-11-
2017 due to economical factors (Yahoo finance, 2018).
6. Calculation of CAPM and beta values:
Beta:
Beta of the company has been calculated on the basis of stock price which is 0.71.
Required rate of return:
Cost of equity of the company is 5.44%.
Calculation of cost of equity (CAPM)
RF 4.00%
RM 6.00%
Beta 0.718
Required rate of return 5.44%
(Morningstar, 2018)
Conservative company:

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The risk of the company’s stock is 0.67 and the return of the company is 5.44% which
explains that the company is a conservative company as the risk of the company is lower and
return is higher.
7. WACC calculations:
Calculation of WACC
Price Cost Weight WACC
Debt 13,74,80,00,000 3.50% 0.90459 0.03166
Equity 1,45,00,00,000 5.44% 0.09541 0.00519
15,19,80,00,000 Kd 3.68%
(Morningstar, 2018)
Working Note:
Calculation of cost of debt
Outstanding debt 13,74,80,00,000
interest rate 5.00%
Tax rate 30.0%
Kd 3.50%
Calculation of cost of equity (CAPM)
RF 4.00%
RM 6.00%
Beta 71.81%
Required rate of return 5.44%

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Implication on WACC:
The WACC rate of the company is 3.68% which is quite lower and it expresses about
the investment implication of the company. It depicts that the company should chose the
investment proposal on the basis of cost of capital of the company. Return must be higher
than WACC.
8. Debt ratios:
Optimal capital structure:
Capitals structure of the company should be lower. But the calculations express that
the company has increased the liabilities and due to which the capital structure of the
company has been worst.
2017 2016
Debt
Ratios =
Total Liabilities/ total
assets
Total Liabilities/ total
assets
18828000000/23323000000 17995000000/23030000000
80.73% 78.14%
Gearing ratios:
Gearing ratio calculations of the company explain that the company has reduced
the bowings and due to which the gearing ratio of the company has been lowered.
2017 2016
Gearing
ratios =
Total Liabilities/
Capital employed
Total
Liabilities/
Capital
employed
66256/(179939-
37504)
66897/(178261-
38110)
46.52% 47.73%

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9. Dividend policy:
Further, the company has announced a good amount of dividend to its stockholders and
from last few years, good dividend amount is given by the company to its stockholders. It
explains that the company is following relevant dividend policy, it explains that the position
of the company could be improved only if the company pays a god dividend amount to its
shareholders (Annual Report, 2018).
10. Recommendation and Conclusion:
To,
Client.
Subject: Recommendation about investment
Date: 31 Jan 2018.
Dear,
This letter is to inform you about your query regarding the investment in TRANSURBAN
GROUP Company. Through this research paper, it has been evaluated that the performance
and the position of TRANSURBAN GROUP (TCL) is better. The risk and return of the
company is also good. Thus, this company is one of the best companies to make an
investment.
You are recommended to make an investment into this company for better returns.

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References:
About us. 2018. TRANSURBAN GROUP. viewed Jan 31, 2018, https://www.transurban.com/
AFR. 2018. TRANSURBAN GROUP. viewed Jan 31, 2018,
http://www.afr.com/street-talk/brokers-launch-156m-transurban-group-shortfall-auction-
20180128-h0pqs9
Annual report. 2018. TRANSURBAN GROUP. viewed Jan 31, 2018,
https://www.transurban.com/content/dam/investor-centre/04/2017-Annual-Report.pdf
Bloomberg. 2018. TRANSURBAN GROUP. viewed Jan 31, 2018,
https://www.bloomberg.com/quote/TCL:AU
FT. 2018. TRANSURBAN GROUP. viewed Jan 31, 2018,
https://markets.ft.com/data/equities/tearsheet/forecasts?s=TCL:ASX
Reuters. 2018. TRANSURBAN GROUP. viewed Jan 31, 2018,
https://www.reuters.com/finance/stocks/overview/TCL.AX
Morningstar. 2018. TRANSURBAN GROUP. viewed Jan 31, 2018,
http://financials.morningstar.com/cash-flow/cf.html?t=TCL&region=aus&culture=en-
US&platform=sal
Yahoo Finance, 2018. TRANSURBAN GROUP. viewed Jan 31, 2018,
https://finance.yahoo.com/quote/TCL.AX/history?
period1=1451586600&period2=1514658600&interval=1mo&filter=history&frequency=1mo

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Appendix:
TRANSURBAN GROUP (TCL) CashFlowFlag INCOME
STATEMENT
Fiscal year ends in June. 2017-06 2016-06
Revenue 2732000000 2210000000
Cost of revenue 927000000 591000000
Gross profit 1805000000 1619000000
Operating expenses
Sales, General and administrative 168000000 149000000
Other operating expenses 714000000 789000000
Total operating expenses 882000000 938000000
Operating income 923000000 681000000
Interest Expense 812000000 774000000
Other income (expense) 63000000 46000000
Income before taxes 174000000 -47000000
Provision for income taxes -35000000 -69000000
Net income from continuing operations 209000000 22000000
Net income from discontinuing ops
Other 30000000 77000000
Net income 239000000 99000000
Net income available to common
shareholders 239000000 99000000
Earnings per share
Basic 0.12 0.05
Diluted 0.12 0.05
Weighted average shares outstanding
Basic 2057056584 1992710728
Diluted 2057056584 1992710728
EBITDA 1614000000 1311000000
TRANSURBAN GROUP (TCL) CashFlowFlag BALANCE SHEET
Fiscal year ends in June. 2017-06 2016-06
Assets
Current assets
Cash
Cash and cash equivalents 988000000 834000000
Short-term investments 157000000
Total cash 1145000000 834000000
Receivables 130000000 111000000
Prepaid expenses 8000000 11000000
Total current assets 1283000000 956000000

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Non-current assets
Property, plant and equipment
Gross property, plant and equipment 327000000 268000000
Accumulated Depreciation
Net property, plant and equipment 327000000 268000000
Equity and other investments 1322000000 1461000000
Goodwill 466000000 466000000
Intangible assets 18864000000 18782000000
Deferred income taxes 1061000000 1097000000
Total non-current assets 22040000000 22074000000
Total assets 23323000000 23030000000
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 880000000 405000000
Accounts payable 347000000 302000000
Deferred revenues
Other current liabilities 912000000 898000000
Total current liabilities 2139000000 1605000000
Non-current liabilities
Long-term debt 12868000000 12468000000
Deferred taxes liabilities 931000000 981000000
Other long-term liabilities 2890000000 2941000000
Total non-current liabilities 16689000000 16390000000
Total liabilities 18828000000 17995000000
Stockholders' equity
Common stock 1450000000 1422000000
Retained earnings 3099000000 3679000000
Accumulated other comprehensive
income -54000000 -66000000
Total stockholders' equity 4495000000 5035000000
Total liabilities and stockholders' equity 23323000000 23030000000
TRANSURBAN GROUP (TCL) Statement of CASH FLOW
Fiscal year ends in June. AUD. 2017-06 2016-06
Cash Flows From Operating Activities
Other non-cash items 837000000 910000000
Net cash provided by operating activities 837000000 910000000
Cash Flows From Investing Activities
Investments in property, plant, and equipment -131000000 -78000000
Acquisitions, net
-
1869000000

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Purchases of investments -344000000 -187000000
Purchases of intangibles -647000000 -437000000
Other investing activities 350000000 127000000
Net cash used for investing activities -772000000
-
2444000000
Cash Flows From Financing Activities
Debt issued 2703000000 3896000000
Debt repayment
-
1718000000
-
3401000000
Common stock issued 1362000000
Dividend paid -891000000 -744000000
Other financing activities
Net cash provided by (used for) financing
activities 94000000 1113000000
Effect of exchange rate changes -5000000 6000000
Net change in cash 154000000 -415000000
Cash at beginning of period 834000000 1249000000
Cash at end of period 988000000 834000000
Free Cash Flow
Operating cash flow 837000000 910000000
Capital expenditure -778000000 -515000000
Free cash flow 59000000 395000000