What do you think of Sydney Airports (SYD) and Transurban (TCL) to buy now?
A: I think both stocks are a touch stretched, and while I like at the right price, I don’t think either represents great value at the moment.
The broker analysts largely agree. On Transurban (TCL), they have a valuation of $13.25 cw the current price of $14.95, so potentially 11.4% overvalued. On recommendations, there are 2 buys, 3 neutrals, and 2 sells. The forecast distribution yield is just 3.0% for FY20 and 3.0% for FY21 (largely unfranked).
With Sydney Airport (SYD), they are a little more positive, with 3 buys, 2 neutrals and 2 sells. The consensus target price is $6.40, 4.5% higher than the current market price of $6.12. The forecast distribution yield is 0.3% for FY20 and 3.7% for FY21.
One of the things that concerns me is the competition risk for Sydney Airport from the new Western Sydney Airport. I seem to be the only one talking about it – but I reckon at some time in the next couple of years, the market will latch on to this.