By Jenny Ruth
Saturday 10th July 2010 |
Text too small? |
Catalysts to improve investor sentiment on Auckland International Airport include its strong operating leverage as passenger numbers recover from cyclical lows, a step up in its property development initiatives and improving retail spending, says Craigs Investment Partners.
The broker also views regulatory developments from the Commerce Commission as broadly neutral for the airport.
Recent route developments, including Jetstar introducing a daily service between Auckland and Singapore from March 2011 and Continental introducing a five to seven day weekly service between Auckland and Housten from November 2011, should stimulate passenger growth.
It estimates a 1% increase in international passenger numbers equates to a $1.6 million increase in net profit. It expects a 12% compound annual growth rate in per-share earnings between 2010 and 2012. It expects the Rugby World Cup will boost international passenger numbers by about 112,000, or about 70% of expected arrivals and departures to and from New Zealand.
"Full-year 2009 to 2012 capex is nominal, debt is flat-lining; cost containment and lower year-on-year depreciation should ensure revenue growth translates to earning-per-share growth," Craigs says.
Risks to its assessment include prolonged weakness in international passenger growth resulting from external shocks, such as a flu pandemic or terrorism, the global financial crisis and a strong New Zealand dollar.
Recommendation: Buy.
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