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Auckland International Airport Ltd reports: Is it too late to buy?

It’s been six months almost to the day since my last article on Auckland International Airport Ltd (ASX: AIA), and I am pleased to report that the company has continued to grow in line with forecasts, with traffic for each month increasing meaningfully on previous years.

On Friday management released the half-year accounts, which provides an excellent opportunity to check in on how the company is faring.

Having soared 20% since November, it’s also an opportunity to evaluate whether the company continues to be a good buy, or if it’s time to ‘Hold’.

Here are the highlights from Friday’s release:

  • Revenue rose 5.4% to $251.4m
  • Total passengers rose 3.8%, with international up 4.4% and domestic rising 3.1%
  • Profit after tax rose 8.1%, although on an ‘underlying’ basis the increase was only 1.3%
  • Half-year dividend was 7.3 cents per share
  • Successful tendering process for a specialty stores operator expected to deliver an additional $5m Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) in 2016
  • Lifted full-year guidance to $167-$174m, which should result in underlying earnings increase of between 7-11% for shareholders

As readers can see, international travel continues to be the major driver of earnings, with new routes delivering significant capacity increases, while economic growth in the Asia-Pacific should see passenger growth continue for the long term.

Underlining the tailwinds benefiting the industry, it’s no coincidence that both Auckland Airport and Sydney Airport Limited (ASX: SYD) have 30-year plans in place to organise and maximise the growth potential from every single passenger.

Auckland Airport also looks likely to deliver another strong earnings performance next year, thanks to the new retail tender awarded to LS Travel Retail Pacific and Aer Rianta International.

Investors can also expect continued strong passenger growth in future years, with the high New Zealand Dollar apparently no hindrance to attracting passengers in the past six months.

While there’s a lot of good to take away from these results, Auckland Airport is beginning to look a little overpriced to me. The rise of the NZD against the Australian dollar combined with recent announcements has seen Auckland soar 20% since November alone.

Its dividend is now worth a meagre 2.4% of its share price – yep, worse than a term deposit – and is totally unfranked.

Even though both dividends and earnings are expected to grow for the foreseeable future, there are simply cheaper shares out there with equivalent if not better dividends and growth prospects.

If you’re looking for growth opportunities, it’s hard to go past The Motley Fool’s Top Stock for 2015a company with almost complete market dominance and enticing plans for expansion into south-east Asia.

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Motley Fool contributor Sean O'Neill doesn't own shares in any company mentioned.

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