Daily ShareChat: Auckland Airport

By Jenny Ruth

Monday 21st February 2011

Auckland International Airport's (AIA) retail operations are likely to be the feature of Auckland International Airport's first-half result when it reports on Thursday, says Geoff Zame at Deutsche Bank.

The airport's disruptive airside retail development was completed in December and the two airside duty-free stores have been operational and performing strongly for all of the first-half, Zame says.

"Our retail revenue forecasts remain unchanged but arguably AIA should be able to comfortably hit their aspirational full-year 2011 target for retail revenue of $105 million (Zame's forecast is $104 million), assuming passenger growth continues to track around current levels."

Favourable anecdotal feedback and firsthand experience of the quality of the new retail offering and the fact extended international departure check-in times mean passengers are in the retail area for longer back his view.

Zame is forecasting first-half net profit will be $57.9 million, up 7.3% on the same six months a year earlier.

"Earnings risk is to the upside in calendar year 2011 in our view with AIA's aspirational target for retail revenue no longer a pipe dream," he says.

He values AIA's retail business on a stand-alone basis at about $1.3 billion using a capitalisation rate of 6.5% and says it compares favourably with Sydney and Melbourne airports.

Recommendation: Buy.

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