Grupo Aeroportuario del Sureste (ADR) (ASR): Opportunity in Mexico’s Airport Operators

With the Mexican economy growing at around 3.5% in 2012, it’s not surprising that airport traffic was up for the year. Tourism is one of the biggest sources of foreign currency for Mexico. As the Mexican economy’s growth is expected to be close to its potential, at 3.5% in both 2013 and 2014 (IMF WEO report April 2013), investing in airport operators is an opportunity to take advantage of growth in tourism, cargo, and business travel.

Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) engages in the operation, maintenance, and development of airports, including Cancun Airport and other airports in the southeast of Mexico.

First-quarter 2013 total revenues increased 6.9% year-over-year. Net income declined 9.5%, hurt by a jump in taxes, but EBITDA rose 10.7% and EBITDA margin increased to 66.74% from 64.42%.

Total passenger traffic was up 8.5% year-over-year. Domestic passenger traffic rose 10.3%, while international was up 7.5%. Also, taking into account that during 2012, Holy Week fell in April, while in 2013 it fell in March, Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) announced recently that total passenger traffic increased in April 5.7% year-over-year. Domestic traffic rose 1.7%, while international increased 8.6%.

Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR) said in February that Aerostar Airport Holding, which it partly owns, won approval from the U.S. Federal Aviation Administration for a 40-year lease to operate Puerto Rico’s biggest airport.

The company announced a cash dividend payment of $3.3022 per share, scheduled May 24 (ex-dividend date May 9). This represents a 19.8% increase year-over-year, and makes for a dividend yield of 2.8%.

Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) engages in the operations of 12 airports in the regions of the Pacific and Center of Mexico.

Its first-quarter profit rose 26.4% year-over-year, helped by lower operational costs at its airports and higher passenger traffic. Revenue rose 4.5% and operating income 15.4%. EBITDA increased 14.1% and EBITDA margin increased from 58.1% to 63.5%.

Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) has been embroiled in a long-running ownership disagreement with miner Grupo Mexico, battling the company in Mexico’s courts to enforce internal bylaws that say no minority shareholder can hold more than 10% of Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC)’s shares. Grupo Mexico owns nearly 30% of GAP’s shares.

During March 2013, total terminal passenger volume increased 9.1% year-over-year. Domestic passenger traffic increased 9.9%, while international passenger traffic rose 8.0%. In April, total terminal passenger volume increased 3.4%. Domestic passenger traffic increased 5.1%, while international passenger traffic increased 0.5%.

Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) announced a 907.5 million peso ($75.4 million) cash dividend this year. This is a 4.5% dividend yield. The first portion was paid on April 25, while the remaining payment of 302.5 million peso ($25.1 million) will be paid prior to Nov. 30.

Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) operates and manages 13 international airports in the north and central regions of Mexico. It also operates a hotel and commercial center outside Terminal 2 at the Mexico City airport.

Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) reported solid results in the first-quarter, with 10.7% year-over-year growth in revenues, 12.1% growth in adjusted EBITDA, and 14.3% growth in operating income. The adjusted EBITDA margin increased to 56.0% from 55.3%, reflecting OMA’s efforts to increase cash flow generation.

Aeronautical revenues increased 7.5%, principally as a result of the growth in passenger traffic. Non-aeronautical revenues increased 20.9%.

Terminal passenger traffic increased 4.6% during the quarter; domestic traffic increased 5.1%, and international traffic increased 2.6%. Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) also reported recently that April traffic jumped 5.9%; domestic traffic was up 7.7%, but international decreased 3.6%.

Valuation

The bottom line

None of these stocks is cheap nowadays, but they are not expensive either. All of them rallied during 2012 and recently reached two-year highs, although they have pulled back a little since.

There is no doubt that these businesses are solid, but Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) is expected to have bigger growth than its peers, as reflected by market pricing over the past year. OMA’s stock price has doubled, while GAP’s and Grupo Aeroportuario del Sureste (ADR) (NYSE:ASR)’s have only increased by 50%.

The one thing that sets Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) apart from the others is its non-airport business segments. Analysts see opportunities for commercial ventures in Monterrey and to expand the airport businesses in Mexico City. Thus, OMA has a separate revenue stream with further growth, which should help balance the airport business.

The article Opportunity in Mexico’s Airport Operators originally appeared on Fool.com and is written by Damian Illia.

Damian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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