Sydney Airport: Interim result 2015
Recommendation
Rising incomes and urbanisation in China has been a boon for Sydney Airport. China accounted for 44% of international passenger growth in the six months to June and is now the airport's second-largest international market behind New Zealand. Due to higher rates of spending, the increasing flow of Chinese passengers also benefited the airport's retailers with retail revenue up 4%.
Six months to Jun | 2015 | 2014 | /(–) (%) |
Passengers (m) | 19.0 | 18.6 | 2 |
Revenue ($m) | 595 | 568 | 5 |
EBITDA ($m) | 488 | 460 | 6 |
DPS (cents) | 12.5 | 11.5 | 9 |
A 3% rise in international passengers helped the company increase revenue 5%. Aeronautical revenue, which accounts for around half of the total, rose 5%, while the airport's other divisions also posted moderate gains.
Property revenue rose 5% due to rent increases and new leases, while revenue from the airport's infamous car parks increased an impressive 9%, which was attributed to the growing popularity of new online booking system and off-peak special offers. Online bookings now account for roughly a third of parking revenue.
Sydney Airport also announced an agreement with Qantas to repurchase the Terminal 3 lease, which was due to expire in 2019, for $535m. Qantas will remain the primary user for at least another decade and will now pay a per passenger fee more similar to aeronautical pricing than rent. Passengers won't see much difference in the short term other than some new retailers. As part of the airport's long-term master plan, however, it intends to co-locate domestic and international flights in the terminal to make for more seamless transfers.
Management increased its guidance slightly to 25.5 cents of dividends to be paid in 2015, for a forward yield of 4.5%. With the stock having barely moved since Sydney Airport's debt to shareholders from 30 Jul 15 (Hold – $5.59), we continue to recommend that you HOLD.
Note: Our Income and Growth portfolios own securities in Sydney Airport.