Kelsian's Capital Intensity Is Higher Than Previously Thought

Kelsian is one of Australia’s largest operators of metropolitan bus services for state governments throughout the country. It also operates private-sector transportation services for Australian resource companies and in the education sector. Public transport service contracts are typically long-term, averaging 6-10 years. Under the contracts, revenue is not linked to the number of patrons or the fares they pay, and indexation mechanisms compensate the operator for fuel, wage, and Consumer Price Index increases. Given that the majority of Kelsian’s revenue is contracted, the group’s earnings are highly defensive, albeit subject to periodic renewal risks.