A stock picker’s guide to Sydney Airport Holdings Ltd

With the current interest in infrastructure stocks following the latest budget, Sydney Airport Holdings Ltd (ASX: SYD) continues to be one to watch. The recent decision to proceed with a second airport at Badgery’s Creek is a long-term positive as Sydney Airport has acquired the valuable first right to develop and operate.

2014 AGM presentation

  • Given on the 15 May, 2014, salient factors were:
  • Strong international passenger growth year to date
  • Sydney Airport is one of the world’s largest airports to accommodate the A380 airbus
  • It has 205 retail leases and more than 360 property leases
  • It has 16,000 car park spaces
  • There are three runways, three terminals and 99 aircraft parking bays

The last 12 months were exceptional with these highlights

  • Strong underlying revenue growth across all key businesses
  • 7.3% EBITDA growth on 4.1% international passenger growth
  • $241 million of capital invested in capacity expansions and business improvements to accommodate ongoing growth
  • Over half of the 36 international airlines landing at Sydney increased seat numbers
  • Growth from both emerging markets and more traditional markets
  • Strong demand to date for Chinese New Year, in addition to a solid Easter and Anzac Day period
  • Key target markets were China, Philippines, India and Indonesia

Strategy to deliver sustainable EBITDA and distributable cash growth going to involve

  • Increase in revenue from duty free operations
  • Prudent management of costs and capital expenditure

Foolish Takeaway

Returning a reasonable dividend of 5.25% per annum and showing a 19% total investor return for the latest year, Sydney Airport has provided a compound return of 22.5% for shareholders since 2009. An expected increase in passenger numbers augurs well for a continuation of similar results going forward. I would be happy to acquire shares in this financially sound company, especially if there is a significant pullback at the end of this financial year.

A value price tag + growth + big dividends!

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Motley Fool contributor Chris Koenig does not have shares in the company mentioned.

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