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Published: July 3, 2009
Grupo Aeroportuario
del Sureste (ASR), which means Airport Group of the Southeast,
operates nine airports in Mexico's busy southeastern region. ASR
is a government-regulated monopoly. With no competing airports
in this part of Mexico, the group holds a monopoly over air
traffic. If you want to fly to Cancun, you must land in Cancun
International Airport, operated by ASR. The Mexico City-based
company is licensed by the Mexican government to operate these
airports under a 50-year contract that runs from 1998 through
2048. The common shares trade on Mexico's Bolsa exchange under
the symbol "ASUR." The company also trades as an American
Depository Receipt (ADR) under the ticker "ASR" on the New York
Stock Exchange, with an exchange ratio of 1 ADR to 10 common
shares of the company.
Yield: ASR pays dividends annually, usually in May or June. An
annual dividend of $4.6936 per share was paid on May 26th to
shareholders of record on May 12th. That gives the shares a
yield of 13% at today's prices. The latest payout is more than
twice as much as last year's, which was more than twice as much
as the year before. Approximately half was from ordinary income
and the balance was a one-time capital gains. The ordinary
income portion is about 93% of 2008 earnings.
Performance: As a government-regulated monopoly
that operates under long-term contracts, ASR provides
shareholders a reliable income stream.
The airport operator
makes money by charging airlines and passengers fees for using
its airport facilities. The more traffic it handles, the more
fees ASR collects. While government-regulated passenger fees
account for some 75% of income, the company also earns lucrative
unregulated rental income from retailers and parking lot
providers that lease the airport space.
Revenue has grown an average +8% annually over the past three
years, while earnings have declined by about -8% annually. For
the first quarter, revenue rose +13%, on increased income mainly
from increased traffic at Cancun. Earnings fell by -3% as the
higher revenue was offset by higher cost of services.
Outlook: The company's earnings outlook is
relatively stable. Earnings of $2.31 per share are estimated to
fall by some -8.7%, this year but regain lost ground in 2010
when they're expected to grow by +8.7%.
A variety of near-term risk factors from natural disasters to
government policies may affect ASR's revenues. International
travelers account for more than half of ASR's passenger traffic
and a hurricane can severely dampen tourist travel, as Hurricane
Wilma did three years ago, when it hit Cancun.
This year's natural disaster was the swine flu outbreak.
Passenger traffic, which accounts for three-quarters of the
company's income, has increased an average +10% a year over the
past few years. In 2009, however, passenger traffic is expected
to decline, partly as a result of the swine flu outbreak, which
led to a -51% drop off in year-over-year passenger travel for
May.
As well, the heavy hand of the government can take its toll on
revenues. In early June, safety concerns led the Mexican
government to suspend air traffic operations at one of ASR's
airports, which represented 5% of the company's total passenger
traffic. The government gave 60 days for the problem to be
corrected.
Despite these near-term threats, over the long-term the company
should benefit from a steady growth in traffic. Management is
implementing a master development plan to upgrade the airports
to handle more international traffic in the years ahead. So far
in 2009, over $5 million have been invested in airport upgrades,
including adding a third terminal and starting construction on a
second runway at its Cancun facility.
Overall, the company is well-positioned to maintain stable cash
flow and dividend payouts. With zero debt, $4.90 in cash per
share, and a monopolistic grip on its markets, the company
should continue generating solid returns over the long-term.
Action to Take --> With a
beta of 1.12, ASR's shares tend to be volatile as near-term
events like the swine flu endemic can trigger a sudden rally or
a sharp pullback. Still, the stock has consistently
out-performed its industry and the broader S&P 500 in every year
over the past five years. Year-to-date, ASR has returned 6.0%,
5.6 percentage points above the S&P 500. Trading near the low
end of their 52-week range, the shares are attractively priced,
especially given their 13.4% yield.
Good Investing!
--Carla Pasternak
Editor
High-Yield International
P.S. This is just
one of ten "Star Performers" Carla Pasternak covers in her
latest issue of High-Yield International. These stocks
carry an average yield of 11.7% and have returned an average of
21% so far this year. To get the names of these 9 stocks
click here. |