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Tuesday 09 September 2014 by Legacy

Sydney Airport Finance Company Pty Limited research report updated - September 2014 Retail

Executive Summary

Sydney Airport Finance Company Pty Limited (SAFC) is the wholly owned financing company of Sydney Airport and it is through SAFC that Sydney Airport’s senior secured bonds are issued
Australian airports operate as effective monopolies as they dominate the aviation markets in their respective states. Sydney Airport is Australia’s largest airport and is the key national hub both domestically and internationally. Sydney Airport Corporation Ltd holds a 50 year lease (with a 49 year option) which began in 1998
Sydney Airport is diversified by passenger type, airline, destination and revenue stream with aeronautical revenues making up 49% of revenues, and retail, property and car parking all making significant contributions
Sydney Airport still managed to grow revenues by 5.7% and underlying EBITDA by 5.6% last year despite continuing slow economic conditions. The financial performance has been underpinned by consistent passenger growth numbers, however the group has reported revenue and EBITDA growth beyond the raw passenger numbers
The company maintains strong levels of liquidity and a diverse debt maturity profile. Management have displayed both a willingness to appropriately manage their debt maturities ahead of schedule while diversifying funding sources.
While the financial profile is somewhat aggressive the company’s continued ability to refinance ahead of maturity is a positive and the airport remains well within debt covenants
The Australian Government has confirmed the location for the proposed development of the second Sydney airport at Badgerys Creek, however we note that this discussion is largely around Sydney’s needs from the mid-2020s and beyond, and would be driven by volumes in excess of those supporting the existing airport. The owners of Sydney Airport retain first right of refusal over any second Sydney airport, and have agreed to enter into an initial consultation process with the Australian Government
Sydney Airport remains well positioned with strong growth prospects based on regulated revenues. The fundamentals of the premier airport asset in Australia should remain attractive to investors over the longer term

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