Grupo Aeroportuario del Pacífico S.A.B. de C.V. (NYSE: PAC) Recent Price: $29.81Market Cap $1.7B 2007 Revenue $343M Net Income $173M FCF $167MMin. dividend yield: 2.9% Est. yield: 5.5-6.0%Intrinsic Value: $50+ThesisThis 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 DescriptionPAC 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 riskIntrinsic 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
Andrew, Have you looked at OMAB? I believe Mexico has 14 airlines, and only 2 break-even with oil over $100. I think that was according to Goldman Sachs. -p
Hey,Yeah, I know OMAB. I'll share my thoughts below on that and ASUR (NYSE: ASR,) the other two Mexican airports. But PAC is the biggest, most diversified, and most profitable. The others are ok too, with OMAB looking pretty good at this valuation, but a bit cheaper would be nice. Interesting stats from GS, and this is why the prices are so low for the airports. But but it really is not much to worry about. Fuel is not a line item in their income statement (well it is, but not like an airline). People will still fly. If oil goes up another 50% will less people fly? Sure... but there will still be some traffic. OMAB: --Baby of the bunch, only been public a year and $870 billion market cap.--Monterrey hub (45% of revenues) is a strong economic area. --Less developed than the others in area of commercial income growth.--Lower proportion of royalty-based contracts for its lessees. --Harder to judge what is going on due to weaker investor communication.--2007 traffic growth: 18%ASR:--Middle - $1.5 billion market cap.--Its all about Cancun. But Cancun is amazing.--Regional government making noises about opening a new airport.--Smaller dividend than the other two (~1.5% vs. 4-6%)--Cancun Terminal 3 opened in May 2007, leading to torrid 33% growth in commercial revenues. With all that capex out of the way, cash flows should be nice going forward. --2007 traffic growth: 18%Take care!Andrew
Hi A how are you guys tracking these ports? Are you keeping a cash position and the money market interest on the port or just tracking gains and losses in equities? What program are you all using to tabulate daily results?thx
Hey KitKat,We are using a program called Stock Trak. It seems to be popular with professors and the like. It starts you off with a $1,000,000 portfolio and it is in cash or some sort of money market fund. There is no set timeframe to invest it, although we are responsible for one idea each week.-Andrew
Hi Andrewhow do you get Stock Trak? I am interested in running a mock $1 m portthx
Hey Kat,It's a for-fee service. For individual investors you can access their tools for $14.95 per month. 'Taint cheap for running a portfolio for sh%&s & giggles.http://www.stocktrak.com/products_indiv.phpRich
KitKat,Have you looked at Marketocracy?http://www.marketocracy.com/It will track a fictional $1M port that you set up for free, and if you are a top performer even throw a little cash your way (not really the point, but a little incentive never hurts).I don't yet have one myself, but its been on the 'to do' list for some time.TMFHelicalCommunity Analyst TeamP.S. - I'd run a healthcare / biotechnology portfolio and attempt to achieve a long term total return of > 8.5% after fees with a low (<0.75) correlation to the S&P500. If that doesn't sound like such an ambitious return, remember I'd probably also be greedy and charge an above market average management fee.
thanks guysI am looking at Marketocracy and it looks good. Free is always best.
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