UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next
Author: TMFRedwood Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 89  
Subject: Grupo Aeroportuario del Pacífico (NYSE: PAC Date: 7/29/2008 10:32 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 5
Grupo Aeroportuario del Pacífico S.A.B. de C.V. (NYSE: PAC)

Recent Price: $29.81
Market Cap $1.7B
2007 Revenue $343M Net Income $173M FCF $167M
Min. dividend yield: 2.9% Est. yield: 5.5-6.0%
Intrinsic Value: $50+

Thesis
This is the 10th most profitable airport group in the world trading at a compelling valuation due to weakening airline traffic, driven by high fuel prices & slowing economic growth.

Company Description
PAC owns 50-year concessions to manage 12 airports in Mexico, including Guadalajara, Tijuana, Los Cabos, and Puerta Vallarta.

Why Buy?
• Low risk, monopoly-type business
• Fast-growing industry over time, driven by economic growth, market share gains from busses, low cost airlines
• Superior economics – EBITDA margins are 65% and net margins are 40%
• Very cheap – trades at a deep discount to historical multiples based on a weak near term outlook

Risks
• Economic weakness in Mexico or US leads to less travel
• High fuel prices force low cost airlines to cut more capacity or bankrupt some carriers
• Mexican government tries to steal economics away from the airports
• Changing of the long term trend of increasing commercial revenue per passenger
• Currency risk

Intrinsic value for this company is more than $50. As a comparison, Copenhagen Airports A/S serves under 2 million residents. Its enterprise value is $3.1 billion and it generated $620M in revenue and $165M in earnings last year. PAC trades at a lower multiple but is more profitable and has much more growth ahead of it – Guadalajara alone is home to 5 million people. At $1.7 billion, the company is a steal.

Aero-Pac is a premier asset trading at an incredible price. In its focus on the short-term, the market is missing the superior economics and long term growth potential. I opened up an initial 2% position at $27.73. At lower prices I would increase my stake up to 6%.

-Andrew
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Should You Be an Index Investor?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement