Auckland International Airport reported a strong result with net profit after tax rising 14%.
The strong result is due to a change in focus of the business to sales and marketing as opposed to the previous management’s emphasis upon capital expenditure.
The result was driven by profitable market share gains and strong retail revenue growth, due to an expanded international departures retail offering and higher car park revenue, with higher occupancy levels from better yield management.
The company commented they have seen a strong start to the new financial year with international passengers up 7% and robust growth in retail spending. The Rugby World Cup should also improve international passenger and retail growth.
Further emphasis upon Asia and India in particular will benefit longer term passenger throughput at Auckland Airport and the continued improvement in the company’s retail offering should see earnings upside.
Auckland International Airport looks fairly valued on a one year forward Enterprise Value to Earnings before Interest, Tax, Depreciation and Amortization of circa 12x, in line with its long term average and in-line with its main Australian peer. A sustainable dividend yield of around 4% net per annum and a defensive underlying business should see the stock well supported.
Mark Warminger