Auckland International Airport (AIA)

[BlackPeter]

Trading halt for proposed $1.4 B cap raise.

https://api.nzx.com/public/announcement/438030/attachment/427195/438030-427195.pdf

https://www.nzx.com/announcements/438046

Hmm - seeking $1.4 billion (split into institutional and retail placings) for $6.95 per share.

Given that the historic return of an AIA share is something like 23 cents in 10 yr average (and hardly better considering just pre-Covid) would this amount to a PE of roughly 30. Historical Earnings CAGR is even slightly negative (i.e. dropping), but this might be caused by Covid.

If we consider as well that the globe is currently reaching peak human (i.e. global population will drop from here) and peak travel (more and more bad sentiments world wide against tourists - New Zealand is not alone in tourist bashing) am I wondering where any sustainable future travel growth is supposed to come from.

Just wondering - where am I allowed to queue up to pay my contribution to enlarge Auckland Airport?

OK - Just kidding ...

[Basil]

I ran my sniffer over the capital raise documentation and couldn't pick up the faintest hint of a decent feed coming in the years ahead.  The dividend yield is beyond pathetic, the earnings metrics REALLY stretched, and they're stuck with price controls on what they levy the airlines.  Where's the growth to support the highly elevated metrics ?  Didn't pass my sniff test for a feed, wasn't even remotely close.

[Perky]

You could be sniffing the wrong food bowl.
Last time I looked AIA make more revenue out of property and retail than aeronautical.

They are a property developer with a landing strip.

They have 1500 hectares of freehold land...the runway just 3535 mtrs of that although I believe runway #2 is underway so they can keep clipping the ticket of those pesky planes that want to use it it as a drop off zone for their passengers

No price controls on developing their land..just the landing strips.

[Basil]

I was looking at the overall earnings, or more correctly, lack thereof.  Just as well super normal profits are just around the corner eh 

[BlackPeter]

You could be sniffing the wrong food bowl.
Last time I looked AIA make more revenue out of property and retail than aeronautical.

They are a property developer with a landing strip.

They have 1500 hectares of freehold land...the runway just 3535 mtrs of that although I believe runway #2 is underway so they can keep clipping the ticket of those pesky planes that want to use it it as a drop off zone for their passengers

No price controls on developing their land..just the landing strips.

Hmm - might be risky to rely these days on huge property gains close to an international airport.

If we look into AIA's past, the amazing 23 cents earnings per share and year they had from 2014 to 2023 (10y  average) contains as well all property gains they made during that time (actually - otherwise Covid would have hit their books much harder). So, clearly not too juicy to date for a $7 share.

Do you really expect real estate to boom again soon? And particuarly next to a very noisy neighbour? Really? Well, if you do - buy as many of the shares as you like, you clearly deserve all you can afford to buy.

Just make sure that global warming won't be an issue over the coming decades for the "valuable" real estate you are speculating on. Amazing floodings they have currently in mid and eastern Europe as well as in parts of Asia. Some call them "historic" and "1 in 1000 years events". But never worry - our resident dinos will tell you all just one offs, no prob. No floodings and no rising sea level in Auckland. Hang on, really?

The people in (Eastern-) Europe didn't believe either there will be a problem. Clearly a strategy people use, but not always useful :p ;

But even if everything goes nice and the climate manages to stabilize immediately ... did you notice that world population did already peak, and our (net-)migration is back to zero as well? Well, the latter obviously just thanks to the idiots currently running our country not knowing how to manage immigration and how to keep people, but we can hardly hope for a better bunch, can we?

Why would anybody expect real estate prices to appreciate in value if the population size is stagnating and soon dropping?

[Basil]

Just adding a bit to what BP has said. Prperty developers trading at a deep discount to NTA are not uncommon on the NZX.  Jarden website has AIA's NTA at $5.82 so its trading at quite a steep premium to NTA.  Additionally, the domestic terminal was subjected to substantial flooding, knee deep water reported in the summer 2023 deluge in Auckland.  Just as well we can be sure their new $1.4 Billion domestic terminal is immune to future extreme weather events...or is it given its so flat and so very close to sea level ?

[Perky]

The airport precinct is like owning the orange and red properties on the monopoly board.

Statistically the most landed on spaces...if you hold these properties you can build great businesses and hotels and charge premium rents.


Anyway the market has spoken...could you doom merchants raise 1.2 Billion dollars in 2 days?

The airport is the gateway in and out of nz...remember we sell stuff to the rest of world and even in a static or declining population...goods move in and out of nz via this logistics gateway

Have a read of their property precincts

https://property.aucklandairport.co.nz/

Pretty sure all these global companies are there for a reason

The Landing is home to a number of the world's largest 3PL and logistics companies including Hellmann World Wide Logistics, Toll, DHL, Fonterra, Coca Cola Amatil, Fuji Xerox, Agility Logistics, DSV, Bunnings, Foodstuffs North Island, Geodis Wilson and EBOS.

They are about the open a 100 retail store outlet mall called Manawa bay...just to give more reason to visit and dwell time and earn a bit more rent. Meanwhile they just keep clipping the ticket for all the planes wanting to land on their concrete strip and use their facilities

Your argument about valuation and earning could just as equally apply to nz other listed  infrastructure monopoly ...Port of Tauranga
AIA and POT are always over valued on every metric

Don't own any AIA myself...think my kingfish funds hold a few and some POT as well...happy with that

You hold KFL beagle?..you own some overvalued AIA and POT then.

[Basil]

Yeah, been buying KFL at ~ 10% discount to NTA so slightly less overvalued than direct ownership 

[Perky]

With all the scaremongering about sea level elevation of Auckland airport and surrounding land...I wondered where Auckland airport actually sits on the global scale....well, well, well.

According to Wikipedia...There are 128 airports at a lower elevation than Auckland at 7 metres.

Some impressive names way ahead of poor old Auckland incl just about every airport in Australia..lol

Some of the biggies are
Singapore, Sydney, Shanghai, San Francisco, schipol, Barcelona , jfk, Vancouver, San Diego, London city


https://en.wikipedia.org/wiki/List_of_lowest_airports


No idea on accuracy of information...DYOR...but thought this was quite interesting.

[Basil]

We should be okay until all the ice in the Greenland shelf melts.  Was watching a documentary piece on it the other night.  Guess how many meters the world sea level will rise when all that ice melts...Yeap, you guessed correctly, 7 meters lol  Hopefully that takes more than a few years so we can get some mileage out of our share of our overpriced monopoly holdings      For what it's worth I did enjoy your eloquent post on Monday but I am pleased KFL have bigger stakes in the likes of ITF and MFT...although they're arguably overpriced too and don't even get me started on FPH lol

[Perky]

Yeah...I shared that Wikipedia chart as I found it bloody interesting and enlightening..I had no idea how many low lowing airports there were

My point the other day was only that the airport is a bit more than aeronautical business.

Shhs...don't let BP know but MFT have a big depot just by airport and your beloved Turners have two branches in otahuhu and manukau which are both only a few metres above airport elevation..lol

If the sea level rises too much at the airport it can become a port for future generations...rise in sea level should fix the dangerous bar and tidal flow issues which make it not suitable today.

[Basil]

Certainly, even more beloved after today's update ! If I thought Tina was going to be at the meeting today and dishing out hugs, I definitely would have attended irrespective of the fact that the PWC building on the waterfront isn't far above sea level either lol

[BlackPeter]

Yeah...I shared that Wikipedia chart as I found it bloody interesting and enlightening..I had no idea how many low lowing airports there were

My point the other day was only that the airport is a bit more than aeronautical business.

Shhs...don't let BP know but MFT have a big depot just by airport and your beloved Turners have two branches in otahuhu and manukau which are both only a few metres above airport elevation..lol

If the sea level rises too much at the airport it can become a port for future generations...rise in sea level should fix the dangerous bar and tidal flow issues which make it not suitable today.

Look, I notice you focus only on one slice of one of the risks I mentioned. Nobody said that the properties will disappear over night. However - increased risk of flooding will reduce their value over time and increase the building costs for anything which still will go up there. Do you understand this concept or are you just a black and white guy?

Your cheap polemic might be fun for you (and probably satisfies your desire to stick in your by Groupthink created comfort zone) - but it is unlikely to boost your investment performance. Always good to at least listen to people with different opinions . hey, you even might learn something?

Anyway - if it works to boost your ego, all good - we all need our daily fix, don't we?

But just for the record - AIA delivered over the last decades (If you add capital gains plus dividends) quite mediocre results (just look at 10 or 30 year performances) - and this was in a time when the population as well as real estate prices were still growing.

Hard to get your head around the idea that the trend might be turning, isn't it?

You didn't told us so far where the much better returns in the future you seem to dream of are supposed to come from, given that AIA was a lame duck until today. Maybe you could focus on this point instead of your quite pointless focus on just sea level rises and other airports. I never said I invest in any of the others you mentioned (didn't I?), but as Basil correctly observed, AIA had already rather recent problems with floodings of its terminals (water coming from above, not from below) - and anybody who follows the news knows, that these phenomena will get worse all around the globe by the year.

Pretty irrelevant comment re Mainfreight. Their income is certainly not dependant on an appreciation of the value of the real estate their storage building stands upon, while AIA seems to live only from property revaluations and capital rises.

Apart from that, I sold recently a good chunk of my Mainfreight holdings (and re-invested into TRA, OCA and HGH), though not because I was concerned about the position of some of their Auckland storage buildings, but because I think that they well might have peaked in the foreseeable future. But hey - this is a discussion for a different thread.

Look Perky, I would not know - but I hope you are able to better counter fact based arguments than using some of the cheapest strategies available to posters like name calling and fighting the strawmen you first created yourself.

[BlackPeter]

Just came across this article in the Business Desk (probably paywalled, but hey - AIA investors must have deep pockets, so - who cares?):

https://businessdesk.co.nz/article/infrastructure/auckland-airports-mega-raise-why-so-much-so-soon?utm_source=Digest&utm_medium=email

Pattrick Smellie asks some interesting questions re the need, the size and the timing of the capital rise.

Admittedly, he did ask all who should know, but didn't got any answers. However - silence can be pretty telling as well.

Just another thing to consider for anybody planning to mortgage the house to buy some more AIA shares ... while I don't think they will at any stage soon drop down to their real value, they well might be after the CR cheaper than at CR. City of Auckland might swamp the market with their shares. Council desperately needs money, and why not selling an underperforming asset. Underwriters might swamp the market (in case City of Auckland does not take up their shares). Others might need to sell to find some money for many other planned and necessary infrastructure upgrades (like POT, Wellington Airport, ....), and hey lots of other Infrastructure is likely to soon get on the block. Ah yes - and what about the risk for them to get a credit rate downgrading? It sounds like some of the rating agencies are watching.

All good reason to avoid them at this stage. Ah yes, and then lets wait what our excessive tourism tax in combination with rising costs and increased environmental awareness will do to the air traffic.

Interesting games for a quite boring stock.