Equity Strategy
Sydney Airport: in the lounge, waiting for final call
Thu 8th July, 2021

We think Sydney Airport’s (SYD) $8.25 cash takeover proposal, from an IFM Investors-led consortium of infrastructure specialists, has room to move higher. The IFM bid benefits from its industry member super fund members having deep pockets, rich asset level experience, and arguably one of the lowest costs of capital in the market.

In our view, the price offered looks too low. The implied control premium does not reflect SYD’s unique position in the region, which has delivered 8.2% CAGR EBITDA growth over 2013-2019.

We see room for IFM to lift the current bid into the $8.50-$9.00 range. This range implies earnings multiple towards the top end of historic global airport M&A transactions. It is not unreasonable for an iconic gateway airport.

Since adding SYD to the Wilsons Advisory Australian Equity Focus list in March 2021, SYD has returned 31%, ahead of the S&P/ASX 200 total return of 9% over the same period. We continue to hold SYD at a 3% weight, given the prospects for a revised higher offer.

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Recommendation structure, definitions and the Financial Services Guide (“FSG”) can be found at www.wilsonsadvisory.com.au/disclosures.

Disclaimer

This document has been prepared by Wilsons Advisory and Stockbroking Limited (AFSL 238375, ABN 68 010 529 665) (“Wilsons”) and its authors without consultation with any third parties, nor is Wilsons authorised to provide any information or make any representation or warranty on behalf of such parties. Any opinions contained in this document are subject to change and do not necessarily reflect the views of Wilsons. This document has not been prepared or reviewed by Wilsons' Research Department and does not constitute investment research. Wilsons makes no representation or warranty, express or implied, as to the accuracy or completeness of the information and opinions contained therein, and no reliance should be placed on this document in making any investment decision. Any projections contained in this communication are estimates only. Such projections are subject to market influences and contingent upon matters outside the control of Wilsons and therefore may not be realised in the future. Past performance is not an indication of future performance.

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Written by

John Lockton, Australian Equities

John is a leading investment strategist with 20 years experience.

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