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 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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Written by

John Lockton , Australian Equities

John is a leading investment strategist with 20 years experience.

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