One of the recent stockmarket mysteries has been the strength of the Macquarie Airports’ price.
Since the 2006 results on February 27, the shares have edged higher, helped by suggestions at a Citigroup investment conference in London last week that MAP might be trying to sell its 32.7 per cent stake in Rome Airports.
Those rumours and the lure of fat capital profits saw the price of MAP Units bounce nicely higher to hit a high of $4.06 late last week. After all there could be a billion dollar profit on the sale, if it happens
But with the release of the Rome Airports 2006 figures this week the MAP price lost some of that hot air and sank 8c to $3.90 on Tuesday on a solid 6.8 million units traded.
Why, the results show a strong year but a lousy fourth quarter and the realisation that MAP’s Italian connection has hit a bit of turbulence.
But Wednesday the units bounced 4c to $3.94 as the optimists wondered if there is something to the sale stories.
Certainly on face value the result show why MAP is said to be looking to sell its stake and “unlock potential”.
Rome’s EBITDA was down 7.3 per cent in the last quarter despite a 6.7 per cent growth in passenger numbers, and a 14 per cent rise in retail revenue growth during the year. EBITDA (earnings Before Interest Tax, Depreciation and Amortisation) was off 1.7 per cent for the year because of lower aeronautical charges. Revenue for the full year was also down.
So lots of money and passengers coming in but lower profits in the last quarter.
This is what MAP said in its results announcement:
“Aeroporti di Roma (AdR) today announced its results for the fourth quarter and full year to 31 December 2006.
“AdR reported EBITDA (earnings before interest, tax, depreciation and amortisation) of €256.7 million representing a 1.7% decrease over the previous corresponding period (pcp) for the full year to 31 December 2006.
“AdR experienced robust growth in non-aeronautical revenues in 2006 increasing by 7.5% on the previous corresponding period (pcp), driven by retail and advertising revenue. This performance, however, was largely offset by a decrease in aeronautical revenues as a result of the reduction in chargeable fuel royalties and the elimination of night surcharges.
“Traffic grew by 6.7% on the pcp to reach 35.1 million passengers for the full year. This strong traffic performance has continued through January and February with growth of 7.9% on the pcp.”
“Retail revenues were strong, growing 14.4% in 2006. This was driven primarily by a 20.7% increase in concession retailing due to the opening of new branded shops.
AdR’s direct retail has also performed strongly, with duty free revenues increasing by 10.8% on the pcp.
“A range of cost control initiatives continued to deliver reductions with underlying cost per passenger decreasing by 4.6%, as operational efficiencies and savings continued on a per passenger basis, excluding the impact of the reduced concession fee”, Ms Mather said.
Ms Mather further noted that AdR’s traffic growth and underlying business continue to be strong. The company will continue to focus on its core business with the spin-off and sale of the cargo business anticipated during 2007.
The result was below expectations of most analysts who seem prepared to give the company the benefit of the doubt, while there are suggestions of a sale around.
The ownership question remains the key and MAP is an outsider in Italy, no matter what it, Macquarie Bank or its mates in the investment banks claim, outsiders to not get to become insiders in Italy without paying a price.
MAP can talk as much as it wants to about increasing its stake but the fact of the matter is that it is a seller and there is only price haggling going on.
The same situation is happening in Italian banking, roads (the Autostrada) and many other businesses. Foreigners either get frozen out, or kick up such a fuss that the Italians let them into the local business industry, at a cost.
With Qantas and Jetstar numbers doing very well at the moment, MAP’s operations at Sydney Airport should be firing very nicely.
The yield looks solid and the company is starting to generate a lot of cash, especially if the Rome sale happens. Capital management, anyone?
