Transurban Group’s (ASX: TCL, OTC: TRAUF) traffic and revenue numbers for the first quarter of fiscal 2014, ended Sept. 30, 2013, reflected the strongest quarterly toll revenue growth in percentage terms since the second quarter of fiscal 2011.

Recent investment in its Sydney roads is only just beginning to pay off, with the completion of the Hills M2 upgrade project contributing to strong growth in the northwest corridor of the network, with increased traffic on Westlink M7, Hills M2 and Lane Cove Tunnel.

This upgrade project has reduced congestion through peak periods, leading to shorter travel times and higher average speeds in the corridor.

Growth on the Sydney orbital has continued in October, with average daily traffic on Hills M2 up 13 percent in the month to date.

Statutory toll revenue for the quarter increased by 14.1 percent to AUD222.6 million compared to the prior corresponding period. Proportional toll revenue–the most accurate reflection of the portfolio’s performance–increased by 13.6 percent to AUD275 million.

Construction of the M5 West widening project remains on schedule and on budget.

The project is currently 53 percent complete, with final completion targeted for late in calendar 2014. The traffic impacts of construction to date have been in line with expectations.

Revenue on the 495 Express Lanes in Northern Virginia grew from a daily average of USD45,270 for the fourth quarter of fiscal 2013 to an average of USD51,736 for the first quarter of fiscal 2014, though remains below forecast.

Management continues to monitor the emerging revenue profile as the project moves through its ramp-up phase.

On Sept. 12 the 495 Express Lanes achieved record daily toll revenue of USD108,493, on the back of a record 47,303 trips for the day.

Transurban’s development pipeline remains robust. Over the next 12 to 18 months the M5 widening in Sydney and the 95 Express Lanes project in Northern Virginia will come on line, and during Transurban’s recent annual general meeting management reported “good progress” in negotiations with the New South Wales government on its F3-M2 tunnel link proposal.

The basic funding sources for the latter project have been agreed, as Transurban is now working through the third and final phase of the government’s unsolicited proposal framework.

Management describes this as a “transformative” project for the northern section of the Sydney orbital network, with capital investment in the construction effort alone of up to AUD2.65 billion.

Management also noted the positive implications of the recent federal election in Australia, as Prime Minister Tony Abbott and his Liberal-National coalition made infrastructure reform a key platform during the campaign.

In August 2013 the Transurban guided to a fiscal 2014 distribution of AUD0.34 per security, which management expects will be 100 percent covered by free cash flow. This represents a 9.7 percent increase over the AUD0.31 paid for fiscal 2013.

Transurban’s portfolio of road assets is among the best in the world. The company has established significant competitive advantages, particularly its relationships with governments in its core markets, that will help it build its networks and grow cash flow and distributions over time.

Transurban Group is a strong buy on dips to USD6.50.

Conservative Roundup

Cardno Ltd (ASX: CDD, OTC: COLDF) has reached an agreement to acquire Houston, Texas, based structural engineering firm Haynes Whaley Associates for up to USD22.25 million, with approximately 10 percent of the purchase price subject to achieving performance targets over the next 12 months and an additional 15 percent deferred for 24 months.

The acquisition will be funded by a mix of 75 percent cash and 25 percent shares. Approximately 550,545 shares will be issued at a price of AUD6.21 per share. The cash component will be funded from available cash and debt facilities.

Management expects Haynes Whaley, which numbers 100 personnel and has offices in Reston, Virginia, and Austin, Texas, to add approximately USD20 million of revenue and USD4.6 million in earnings before interest, taxation, depreciation and amortization (EBITDA) over the next 12 months. It will be immediately accretive to earnings per share.

Haynes Whaley will operate as Cardno Haynes Whaley going forward.

The acquisition boosts Cardno’s structural engineering capabilities across a broad range of commercial, public and institutional clients. The firm works internationally as well as nationally, with project experience across 40 US states, Africa, the Caribbean, Malaysia, and Singapore.

Haynes Whaley counts among its clients developers, architects and a range of public, institutional and private entities such as the City of Houston, The Walt Disney Company’s (NYSE: DIS) Walt Disney Imagineering unit, the Texas State University System, the National Institutes of Health, the General Services Administration, Rice University, CBRE Group Inc (NYSE: CBG) unit Trammel Crow Company, Exxon Mobil Corp (NYSE: XOM) and NASA

Cardno is a buy under USD8.05 on the Australian Securities Exchange (ASX) using the symbol CDD.

Cardno also trades on the US over-the-counter (OTC) exchange under the symbol COLDF. Buy Cardno in the US under USD8.05.

Ramsay Sime Darby currently has three Malaysian hospitals from Sime Darby Healthcare and three in Indonesia from Ramsay.

The expansion plan extends beyond Malaysia and Indonesia initially, with eyes on Vietnam and China. As is the case with Ramsay Health Care, expansion will be based on greenfield as well as brownfield hospitals.

A new hospital would cost the joint venture MYR200 million to MYR300 million, while the acquisition and redevelopment of existing hospitals depends on the market value.

The company says that three to five years is the normal gestation period for such investments, but a typical payback period for hospitals is about nine years.

Management of the JV has identified opportunities in China and met with operators. But it can’t proceed without local partners. The process of establishing a presence in the Middle Kingdom will be a slow one.

Guiding Ramsay Sime Darby’s Asia growth plan is the emerging middle class in the region. In Malaysia and most markets prime hospitals are generally located in developed areas.

International patients–including expatriates, travelers and a few medical tourists–make up of 6 percent of total patients in Ramsay Sime Darby’s Malaysian operations. The group hopes to increase the international patient numbers to 10 percent in Malaysia within two to three years.

Health tourism is a potential source of growth, as Malaysian Prime Minister Seri Najib Tun Razak has expressed a desire to turn the country into a regional healthcare hub.

Over the past three years Malaysia has seen more than 20 percent growth in health tourism and generated almost MYR600 million of revenue in 2012. The Malaysian Healthcare Travel Council (MHTC) has done extensive work to boost the country’s technology platform and provide web-based medical and health-related information for a global audience.

Medical tourists are actually coming from developed Asian countries in large numbers. Growth of such patients from Japan reached 20 percent over the past 12 months, and many Japanese are now registered in Malaysia’s “My Second Home” program. Others are learning about Malaysia’s health care advantages via word of mouth.

The MHTC forecast that 700,000 medical tourists will travel to Malaysia in 2013, up from 392,000 in 2010, 538,000 in 2011 and 671,000 in 2012.

Ramsay Health Care’s agreement with Medibank Private Ltd, one of the largest private health insurers in Australia, includes a 7.55 percent payments increase over three years, with a 2.2 percent increase in the first year followed by 2.6 percent and 2.75 percent increases in years two and three.

These rates are more in line with inflation rather than the 3 percent private hospital operators such as Ramsay have become accustomed to.

There will be no increases over the three-year period for rehabilitation and psychiatric care, though acute care payments will rise by 4 percent on an annual basis.

Ramsay Health Care is a buy under USD38 on the Australian Securities Exchange (ASX) using the symbol RHC and on the US over-the-counter (OTC) market using the symbol RMSYF.

Aggressive Roundup

Australian Treasurer Joe Hockey has signed an interim order extending the statutory time period for a decision on Archer Daniels Midland Co’s (NYSE: ADM) proposed acquisition of AE Portfolio Aggressive Holding GrainCorp Ltd (ASX: GNC, OTC: GRCLF).

Mr. Hockey’s order, in its own words, “provides certainty to all parties by ensuring that a decision will be made by 17 December 2013.”

The review of ADM’s AUD12.20 per share plus AUD1 per share in dividends offer–a total of AUD3.2 billion–has become a political football in the early days of Prime Minister Tony Abbott’s Coalition government. Mr. Abbott is being pushed by business leaders including BHP Billiton Ltd (ASX: BHP, NYSE: BHP) Chairman Jac Nasser to send a positive message to global investors so Australia can attract foreign investment.

At the same time, members of Parliament from the National half of the Liberal-National Coalition object to a foreign entity taking control of a company that controls such a significant part of Australia’s agriculture economy.

While granting that the government “welcomes foreign investment because of the benefits that it provides to the Australian economy,” Mr. Hockey’s order acknowledged that GrainCorp “is a significant Australian company involved in grain marketing, processing, storage and transport.”

Mr. Hockey specifically cited the size of the transaction as well as the complexity of the issues raised in extending the evaluation period by Australia’s Foreign Investment Review Board.

GrainCorp remains a hold pending resolution of its status vis-à-vis ADM.

On Aug. 15 Mineral Resources Ltd (ASX: MIN, OTC: MALRF, ADR: MALRY) announced that a worker at the Christmas Creek mine site had been fatally injured.

Mineral Resource’ Crushing Services International (CSI) unit operates the two iron ore processing facilities at Christmas Creek. CSI delivers 50 million metric tons per annum (Mmtpa) of crushing output to Fortescue Metals Group Ltd (ASX: FMG, OTC: FSUMF, ADR: FSUGY) on a build-own-operate basis.

On Sept. 24 Fortescue, the world’s fourth-biggest iron ore producer, announced it would exercise its “step-in” right and immediately assume management and supervision to “ensure the safe and hazard-free operation of the ore-processing facilities” without referring to the recent fatal accident.

The announcement sent Mineral’s share price spiraling from a close north of AUD12 on the Australian Securities Exchange (ASX) as of Sept. 23 to AUD10.89 by Oct. 2.

The temporary move will likely have a small financial impact. Output will be limited during what will be a short ramp-down and ramp-up of the ore processing facilities as management is transitioned to Fortescue. And there will be a loss of management fees paid by Fortescue for the length of the step-in period.

There is some concern about the impact on CSI’s reputation, which we discuss at greater length in one of this month’s Sector Spotlights. In short, however, the short-term selloff coupled with Mineral Resources’ long-term positioning is enough to make the stock one of our “best buys” for October.

Mineral Resources is a buy under USD11 on the Australian Securities Exchange (ASX) using the symbol MIN and on the US over-the-counter (OTC) market using the symbol MALRF.

Mineral Resources also trades on the US OTC market as an American Depositary Receipt (ADR) under the symbol MALRY. Mineral Resources’ ADR, which is worth one ordinary, ASX-listed share, is also a buy under USD11.

Oil Search Ltd (ASX: OSH, OTC: OISHF, ADR: OISHY) announced that Esso Highlands Ltd, a subsidiary of Exxon Mobil Corp (NYSE: XOM) and the operator of the Papua New Guinea Liquefied Natural Gas (PNG LNG) project, has finalized arrangements to raise USD1.5 billion of supplemental financing, taking the total project financing facility to USD15.5 billion.

The additional funds will be used to finance the debt component of the project cost increase announced in November 2012, when Exxon Mobil lifted the estimate by 20 percent to USD19 billion. The adjustment was due primarily to foreign exchange fluctuations and torrential rain but also because Exxon expanded capacity from the originally planned 6.6 million metric tons per year.

Oil Search CEO Peter Botten noted at the time, “As previously indicated, the capital cost increase is expected to be funded 70 percent by debt and 30 percent by equity. Discussions are currently underway to secure the USD1.5 billion of supplemental debt that is provided for under the existing project finance agreement, to fund the 70 percent debt component.”

As of Sept. 2, 2013, the estimated cost of the project remains unchanged, at USD19 billion, and it remains on track to achieve first deliveries of liquefied natural gas in the second half of 2014.

When the PNG LNG comes online, Oil Search’s output will quadruple to 25.6 million barrels of oil equivalent in 2015 from 6.4 million in 2013. And production may reach 35.6 million barrels by 2020. Oil Search owns 29 percent of PNG LNG.

Revenue is projected to rise 234 percent to USD2.42 billion by 2015, from USD725 million in 2012.

Oil Search is well funded, with cash of USD292 million as of the end of the first quarter. About USD380 million on a USD500 million corporate facility remains undrawn.

There aren’t many LNG assets in the world with the kind of economics that PNG LNG has, with the scope for further expansion.

Oil Search reported a 2013 first-half profit increase of 6 percent to USD113.5 million, though sales were off 4 percent to USD381 million and output declined 2.1 percent to 3.19 million barrels of oil equivalent.

Management noted in its discussion of results that expansion of PNG LNG could be delayed. But management also signaled a significant dividend boost once it comes on line.

Oil Search is a buy under USD8 on the ASX using the symbol OSH and on the US over-the-counter (OTC) market using the symbol OISHF.

Oil Search also trades as an ADR on the US OTC market under the symbol OISHY. Oil Search’s ADR represents 10 underlying shares traded on the ASX and is a buy under USD80.

SMS Management & Technology Ltd (ASX: SMX, OTC: SMSUF, ADR: SMSUY) closed the acquisition of The Birchman Group Asia Pacific Ltd for AUD25 million, including an up-front payment of AUD12.5 million in cash, to be funded by debt, followed by two further payments conditional on profit performance over a two-year period.

Birchman Asia Pacific is an established IT solutions provider headquartered in Perth. It offers a full range of business consulting, integration and managed services to enterprise and government clients in Western Australia. It’s also an independent alliance partner of the Birchman Group in Europe, which isn’t part of this acquisition.

Birchman generated annual revenue of approximately AUD32 million, diversified across government, enterprise and resource sectors. SMS management expects the deal to be accretive to earnings per share in fiscal 2014.

The acquisition expands SMS’ presence in Western Australia, where enterprise and government clients are increasing need of end-to-end IT solutions providers.

Birchman brings extensive systems integration capability, providing a foothold for SMS to cross-sell its other capabilities. Over 30 percent of Birchman’s revenue was derived from multi-year contracts for application support, managed services and recurring sources.

We moved SMS to the Aggressive Holdings from the Conservative Holdings because the resilience of its business model demonstrated during the Great Financial Crisis seemed to erode during fiscal 2013.

Earnings have declined due to structural and cyclical factors, and it could be some time before we see a rebound. But acquisitions–including the AUD22 million deal for cloud solutions provider Indicium completed in early July–will help cover the earnings gap that opened up last year.

Together Indicium and Birchman should make up for about AUD9 million of annualized earnings before interest and taxation (EBIT) against the AUD22 million decline reported from fiscal 2011 to fiscal 2013.

Management noted during the presentation of fiscal 2013 results that “a rebound in client demand during the first half of fiscal 2014 is unlikely,” as the sales pipeline continues to weaken. SMS could benefit from a return to more normal levels of federal government spending, which accounted for 12 percent of fiscal 2013 revenue, driven by stronger economic growth. Key will be the financial services sector, which generated 23 percent of fiscal 2013 sales.

Management is also likely to further reduce headcount to cut costs should staff utilization rates continue to whither.

Much of the positive earnings impact of recent acquisitions has already been priced into SMS’ stock. And recent action on the Australian Securities Exchange hasn’t been positive.

But SMS is well positioned to benefit from a resurgent Australian economy. We are, however, reducing our buy-under target on the stock.

SMS is a buy under USD5 on the Australian Securities Exchange (ASX) using the symbol SMX and on the US over-the-counter (OTC) market using the symbol SMSUF.

SMS also trades as an American Depositary Receipt (ADR) on the US OTC market. SMS’ ADR, which is worth two ordinary, ASX-listed shares, is a buy under USD10.

In his address to WorleyParsons Ltd’s (ASX: WOR, OTC: WOPEF, ADR: WOPEY) annual general meeting of shareholders CEO Andrew Wood noted that the current “flow pattern” of new contract awards indicates fiscal 2014 earnings will be “more heavily biased” to the second half than in recent years.

Mr. Wood had noted earlier in his speech–in line with management’s full-year report in August–that the first half of fiscal 2013 was quiet with regard to new contracts but there was a “strong flow of awards in the last six months.”

This didn’t translate into momentum for the first six months of the new year, however, and management forecast that in fact fiscal 2014 first-half earnings will be lower than the prior corresponding period.

Mr. Wood did confirm the outlook WorleyParsons provided in August, despite ongoing challenges in the markets in which it operates. That is, for the full year management expects, based on its geographic and sector diversification, to deliver higher earnings in fiscal 2014 than it did in fiscal 2013.

WorleyParsons is a buy on the Australian Securities Exchange (ASX) using the symbol WOR and on the US over-the-counter (OTC) market using the symbol WYGPF under USD24.

Worley Parsons also trades on the US OTC market as an American Depositary Receipt (ADR) under the symbol WYGPY. The ADR is worth one ordinary, ASX-listed share. WorleyParsons’ ADR is also a buy under USD24.

Numbers to Come

Here’s when AE Portfolio Holdings will report their next sets of financial and operating numbers.

A couple Holdings have “confirmed” dates, while for others we’ve provided an “estimate.”

For most this will cover the first half of fiscal 2014, which ends Dec. 31, 2013. We’ve noted for others that report on a different schedule the period to which the announcement pertains.

Conservative Holdings

• Aberdeen Asia-Pacific Income Fund (NYSE: FAX)–N/A (fund, reports holdings on a quarterly basis)
• AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY)–Feb. 26, 2014 (FY 2014 H1, estimate)
• APA Group (ASX: APA, OTC: APAJF)–Feb. 19, 2014 (FY 2014 H1, estimate)
• Australand Property Group Ltd (ASX: ALZ, OTC: AUAOF)–Feb. 6, 2014 (2013, estimate)
• Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY)–Oct. 29, 2013 (FY 2013, confirmed)
• Cardno Ltd (ASX: CDD, OTC: COLDF)–Feb. 18, 2014 (FY 2014 H1, estimate)
• CSL Ltd (ASX: CSL, OTC: CMXHF, ADR: CMXHY)–Feb. 12, 2014 (FY 2014 H1, estimate)
• Envestra Ltd (ASX: ENV, OTC: EVSRF)–Feb. 20, 2014 (FY 2014 H1, estimate)
• GPT Group (ASX: GPT, OTC: GPTGF)–Feb. 13, 2014 (2013, estimate)
• M2 Telecommunications Group Ltd (ASX: MTU, OTC: MTCZF)–Feb. 24, 2013 (FY 2014 H1, estimate)
• Ramsay Health Care Ltd (ASX: RHC, OTC: RMSUF)–Feb. 25, 2014 (FY 2014 H1, estimate)
• Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY)–Feb. 6, 2014 (FY 2014 H1, estimate)
• Transurban Group (ASX: TCL, OTC: TRAUF)–Feb. 4, 2014 (FY 2014 H1, estimate)
• Wesfarmers Ltd (ASX: WES, OTC: WFAFF, ADR: WFAFY)–Feb. 13, 2014 (FY 2014 H1, estimate)

Aggressive Holdings

• Amalgamated Holdings Ltd (ASX: AHD, OTC: None)–Feb. 20, 2014 (FY 2014 H1, estimate)
• Ausdrill Ltd (ASX: ASL, OTC: AUSDF)–Feb. 25, 2014 (FY 2014 H1, estimate)
• BHP Billiton Ltd (ASX: BHP, NYSE: BHP)–Feb. 19, 2014 (FY 2014 H1, estimate)
• GrainCorp Ltd (ASX: GNC, OTC: GRCLF)–Nov. 15, 2013 2013 (FY 2013, estimate)
• Mineral Resources Ltd (ASX: MIN, OTC: MALRF)–Feb. 13, 2014 (FY 2014 H1, estimate)
• Oil Search Ltd (ASX: OSH, OTC: OISHF, ADR: OISHY)–Feb. 25, 2014 (2013, estimate)
• Origin Energy Ltd (ASX: ORG, OTC: OGFGF, ADR: OGFGY)–March 20, 2014 (FY 2014 H1, estimate)
• Rio Tinto Ltd (ASX: RIO, NYSE: RIO)–Feb. 13, 2014 (2013, estimate)
• SMS Management & Technology Ltd (ASX: SMX, OTC: SMSUF, ADR: SMSUY)–Feb. 19, 2014 (FY 2014 H1, estimate)
• Spark Infrastructure Group (ASX: SKI, OTC: SFDPF)–Feb. 24, 2014 (2013, estimate)
• Woodside Petroleum Ltd (ASX: WPL, OTC: WOPEF, ADR: WOPEY)–Feb. 19, 2014 (FY 2013, estimate)
• WorleyParsons Ltd (ASX: WOR, OTC: WYGPF, ADR: WYGPY)–Feb. 12, 2014 (FY 2014 H1, estimate)