Sydney Airport has started to re-negotiate access agreements. Macquarie assesses the company is facing a more challenging slot environment, as competitors, such as Western Sydney, Melbourne and Brisbane, are adding runway capacity.
Thus the emphasis needs to shift to service quality in order to differentiate the airport. Additional T4 expenditure to enhance capacity is likely to mitigate pricing pressure, the broker acknowledges.
Macquarie does not consider the multiple stretched, while the recent sale of Hobart Airport emphasises the value in Sydney Airport.
Rating is upgraded to Outperform from Neutral and the target raised to $8.77 from $8.53.
Target price is $8.77.Current Price is $8.14. Difference: $0.63 – (brackets indicate current price is over target). If SYD meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges – negative figures indicate an expected loss).