SYD – Macquarie rates the stock as Downgrade to Underperform from Neutral

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The Productivity Commission review in the next nine months resets the focus to the threat around regulatory intervention, Macquarie observes. Submissions are taking a similar approach to previous reviews, with the airports supporting the current regime and airlines arguing for a more credible threat of “final offer” arbitration.

However, Macquarie doubts that regulatory intervention would make an impact on end-users versus lifting airline profitability. The broker takes a conservative approach, suggesting the pace of dividend growth will likely need to slow to ensure a smooth path for re-pricing and a shift to tax being paid.

Rating is downgraded to Underperform from Neutral. Target is raised to $7.13 from $7.05.

Sector: Transportation.

Target price is $7.13.Current Price is $7.25. Difference: ($0.12) – (brackets indicate current price is over target). If SYD meets the Macquarie target it will return approximately -2% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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