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How to value Sydney Airport

19032019_Sydney airport

How to value Sydney Airport

Many investors regard Sydney Airport (ASX:SYD) as a key defensive asset due to its monopoly over Australia’s main gateway, solid earnings growth and yield. But just how do you value a company like SYD? In part 4 of our analysis, we look at the valuation considerations and a key issue that could impact the future earnings.


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Joseph is a Senior Analyst at Montgomery Investment Management. Joseph has twelve years’ experience in equities research, funds management and M&A. Before joining Montgomery, he was a Senior Analyst at Colonial First State Global Asset Management responsible for coverage of resources, energy, infrastructure and industrials sectors. Joseph’s prior experience includes roles in equities research at JP Morgan and at Ellerston Capital.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. Buy Auckland Airport – ASX: AIA – instead; they own their land instead of leasing it and their chart is very bullish.

    • Hi Steven,
      There’s no doubt investors are attracted to Sydney’s yield, which is propped up by the use of debt to fund capex (so as to maintain a relatively stable gearing profile). So yes, towards the end of the concession there will be a significant drop off in dividend payments as operating cash will need to repay debt over a period of time – however, the return benefit of bringing those cash-flows forward can be significant for a long-term investor.

      The SYD business model allows this capital structure to some degree as the capex is generally underpinned by a relatively bankable commercial rate of return given the demand profile.

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