Atlas Arteria (ASX: ALX) offers a forward distribution yield of 8% based on management guidance. APRR delivered revenue growth of 3.2% in the nine months to September 2025. Smaller roads did even better—Skyway up 5.1% and Greenway up 8.4%. IFM Investors increased its stake in Atlas to 35% in November 2025.

Why it matters: Atlas Arteria’s big yield attracts, though it is not maintainable over the long term because it loses the APRR concession in about 10 years. APRR is the core asset, contributing more than 80% of proportional EBITDA. APRR continues to knock out solid results based on modest traffic volume growth and toll uplifts. Car trips are supported by steady unemployment levels in France, and truck volumes have recovered in line with trade with the rest of Europe. Other roads are performing even better. Of particular importance is a 9.4% increase in traffic volumes on the Dulles Greenway so far this year as competing roads become more congested. This should get the road close to breakeven, with likely toll uplifts to complete the recovery in the coming years.

The bottom line: Narrow-moat-rated Atlas Arteria looks reasonable value, trading at a 7% discount to our unchanged fair value estimate of $5.40 per security. With IFM creeping up the register, a takeover offer is possible. We forecast a five-year proportional EBITDA compound annual growth rate of 5.2% on solid growth in traffic volumes and tolls. However, distributions are likely to be flat for a few years, given they exceed free cash flow. Additionally, Greenway is barred from paying dividends to Atlas for a few more years.

Coming up: The Dulles Greenway is suing the US state of Virginia after its request for big toll uplifts was rejected. Uniquely, Greenway’s toll uplifts must be approved by the state’s regulator, which tries to balance fair returns for investors with affordable tolls for motorists.

But with weak traffic volumes since the pandemic and no toll increase since 2022, Greenway has been unable to fully cover interest payments with free cash flow in recent years. We think a material toll uplift is warranted and factor in a cumulative 15% increase over the next three years. In the unlikely event that Greenway can’t negotiate a toll increase, it would be unlikely to pay dividends for the foreseeable future. But to put this in perspective, Greenway contributes less than 8% of our fair value estimate for Atlas Arteria.

Atlas Arteria to benefit from improving traffic volumes and solid toll uplifts

Atlas Arteria is a global toll-road group. By far its most valuable asset is a 31% stake in Autoroutes Paris-Rhin-Rhone. Despite APRR’s dominant motorway network in eastern France, the short concession life, high base capital expenditure requirements and subdued organic growth make it less attractive than some motorways. Longer-term distribution growth is likely to be held back by higher interest rates and, from the mid-2020s, the need to pay off all debt at APRR before handing the motorway concession back to the government in 2035. After the APRR concession ends, we estimate Atlas Arteria’s distributions will fall by two thirds to a level supported by the smaller Dulles Greenway and Chicago Skyway.

APRR is one of the largest tolled motorway groups in Europe. Concessions covering its main network end on Nov. 30, 2035, and on the smaller AREA network on Sept. 30, 2036. These concessions are relatively short compared with those for other listed toll-road operators. When the concessions end, the roads are returned to the government for no consideration and after repaying all debt. The APRR concessions set base toll increases at 70% of the consumer price index, or CPI, excluding tobacco, and set a base level of maintenance and upgrade capital expenditure of about EUR 200 million per year.

Atlas Arteria also owns 100% of Dulles Greenway and 67% of Chicago Skyway. Along with high debt levels, the main issue for Greenway is weak traffic volumes following the pandemic and as competing roads have been upgraded. After failing debt service coverage tests in recent years, Greenway is not allowed to pay distributions to investors. The Skyway also suffers from weak traffic volume growth, but tolls increase relatively quickly and its balance sheet is sound.

Atlas also owns the Warnow Tunnel in Germany, but it is tiny, contributing 1% of proportional EBITDA.

Bulls say

  • We forecast distributions to investors increase at a low-single-digit percentage on CPI-linked tariffs at APRR.
  • APRR is a good-quality asset. Revenue is defensive, and earnings have a positive long-term outlook. Dulles Greenway and Chicago Skyway add longer-term value.
  • Toll roads are in high demand from pension funds and other large investors searching for yield. The two best roads could potentially be sold for high prices.

Bears say

  •  While distributions should increase in the medium term, Atlas must repay APRR debt before losing the asset in 2035.
  • While the best in Atlas Arteria’s stable, APRR is less attractive than many other toll roads because of its relatively short concession life, high ongoing capital expenditure, and subdued organic revenue growth.
  • Distributions are expected to exceed underlying free cash flows for the medium term.

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