Atlas Arteria Earnings: Weak Cash Flows Depress Distribution Outlook

Narrow-moat-rated Atlas Arteria’s proportional EBITDA increased 7% to AUD 1.38 billion in 2023 on the recovery of traffic volumes and solid toll uplifts. There were no surprises with traffic volumes and revenue, previously released in the firm’s quarterly update. However, earnings were slightly below expectations as operating cost inflation was worse. We downgrade our forecasts marginally for higher operating costs and interest expense and trim our fair value estimate by 4% to AUD 5.60 per security—the stock currently screens as fairly valued.