What’s being overlooked in the Sydney Airport (ASX:SYD) share price?

Analysts reportedly believe the Sydney Airport share price is lagging up to 65 cents behind the airport’s true value

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Plane taking off from Sydney airport with CBD in background

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The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price is falling today amid reports the market is overlooking the value of land owned by the airport.

The Sydney Airport owns 907 hectares of land on the northern side of Botany Bay, some of which is reportedly ripe for development.

Right now, the Sydney Airport share price is $7.74, 0.64% lower than its previous close.

That’s also lower than the $8.25 per share takeover offer put to the airport by a consortium of infrastructure investors. The takeover offer was rejected last month, with Sydney Airport saying it undervalued the company.

Let’s take a closer look at the supposed forgotten value of the Sydney Airport.

Sydney Airport’s hidden value

The Sydney Airport share price is slipping today as reports the market has forgotten about its land holdings swirl.

According to reporting by the Australian Financial Review (AFR), analysts believe Sydney Airport is literally sitting on a $900 million asset.

The publication quoted Macquarie analysts. They’re said to believe if some land were to be developed the Sydney Airport share price could gain 33 cents.

The analysts said Sydney Airport has at least 2 parcels of land – around 54 hectares – that could potentially be developed.

The AFR quoted the analysts as saying:

Given the emerging road connections in the northern land parcels, it is an ideal freight/logistics hub, and possibly a catering location for the airport. However, its current earnings contributions are zero.

Additionally, the analysts said Sydney Airport is currently charging Qantas Airways Ltd (ASX:QAN) 4 times less than market rates for the airline to rent Jet Base. That could be costing the airport between 22 cents and 30 cents per share.

This means the Sydney Airport’s shares are lagging by between 55 cents and 65 cents each.

Sydney Airport share price snapshot

This year has been a good one for the Sydney Airport share price. It is currently 20% higher than it was at the start of 2021. It has also gained 52% since this time last year.

The airport has a market capitalisation of around $21 billion, with approximately 2.7 billion shares outstanding.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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