Daily ShareChat: Auckland International Airport

By Jenny Ruth

Tuesday 14th September 2010

Auckland International Airport's underlying net profit of $105 million for the year ended June was in line with expectations and consistent with prior period earnings while free cash flow excluding acquisitions was a record $123 million, says Nichiket Moghe, an analyst at Aegis Equities Research.

"Given the uncertainty prevailing in global markets, it was heartening to see management provide a forecast," Moghe says.

The company expects a net profit between $112 million and $118 million for the year ended June 2011, propelled by 5% growth in passenger volumes. Moghe's forecast for 2011 is $117 million, rising to $136 million the following year.

"A number of airlines have announced new services through Auckland which is expected to lift capacity by 850,000 seats over the next 12 to 18 months," he says.

"This should translate into higher revenue and earnings."

The airport's 1,500 hectares of land presents it "with a huge opportunity for commercial and retail property development." High interest and depreciation expenses are likely to constrain earnings growth in the medium term.

"Over the longer term, the attitude of regulators, which so far has been favourable, will have a bearing on valuation," Moghe says. He values the shares at $1.50.

Recommendation: Reduce.

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