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We often observe generalist market commentators suggesting that the share prices for toll roads and infrastructure stocks are stretched. Analysis of these conclusions suggest that they are underpinned by crude valuation measures that fail to account for the unique characteristics of these assets. In this note, we talk about our approach to valuing toll roads and how it differs from approaches that are often applied to valuing other publicly listed companies.
Toll roads are a key segment of the global infrastructure market which have grown over time as governments in many countries have followed the trend
to move away from publicly funded construction and management of toll roads towards combined approaches that involve the knowledge and expertise of private enterprise. Opportunities to invest in toll road companies have expanded in line with this trend. For professional investors, assessments on the value of toll road assets need to reflect some rather unique characteristics that distinguish toll roads from industrial shares.