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Daily ShareChat: Auckland International Airport

By Jenny Ruth

Thursday 15th July 2010

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 Jenny Ruth

Auckland International Airport's purchase of 25% of the Queenstown airport for $28 million is probably an opportunistic acquisition, say Marcus Curley and Adrian Allbon at Goldman Sachs JB Were.

"Our analysis suggests this is an attractive deal for Queenstown Airport, providing access to equity capital, operational expertise, destination marketing program and route development capability," the analysts say.

The Auckland airport is paying a modest premium to its own trading multiple and the global average for minority airport trade sales, they say.

"However, we continue to struggle to see how a formal relationship with Queenstown airport creates the key transaction synergy, being more effective rout development into Auckland airport."

Auckland airport used a similar rationale earlier this year when it paid about $167 million to buy a 24.6% stake in North Queensland Airports, which owns the Cairns and Mackay airports.

"At this stage, we are taking a 'three strikes and you're out' approach with the company's assurances of no further acquisitions without proof of success probably strong enough to avoid any material de-rating associated with being seen as an airport portfolio investor."

Curley and Allbon say investor focus is being diverted away from the key positives of international passenger growth, retail expansion and property development at the Auckland airport to "the uncertain financial benefits from airport acquisitions."

Recommendation: Buy


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