Ann: Strong demand at Australian airports drives , page-7

re: Ann: Strong demand at Australian airports... All,

Tim Boreham from The Australian posted this today.

It indicates that AIX is well undervalued by the market.

Regards.............

"Benefits in AIX selling HTAC airport stakes

* Tim Boreham
* From: The Australian
* March 08, 2011 12:02PM

THE airport owner's virile passenger growth numbers this morning only confirm our suspicion that making money out of flyers on the ground, rather than in the stratosphere, is a more reliable game.

The Hastings-managed AIX reported an overall 9.8 per cent jump in passenger numbers in January, led by 15 per cent growth across its 49 per cent-owned Queensland Airports (owner of the Gold Coast, Townsville and Mt Isa facilities).

We're a tad surprised by this: apart from the flood and other weather disruptions, we assumed that inbound tourism had taxied to a halt.

But its airports weren't in the eye of the disasters and any collateral malaise has been more than offset by new routes, new operators and a major capacity upgrade on the Gold Coast.

According to AIX CEO Jeff Pollock, local airports "continue to benefit from airline competition, route development and capacity additions, which are stimulating passenger demand and growth".

All good -- but the AIX story gets murkier here because of the protracted issue of asset sales, which would have the benefit of cleaning up the fund's ownership structure.

AIX owns just under 30 per cent of Perth Airport, 28 per cent of NT Airports and 12.4 per cent of Australian Pacific Airports Corp, which owns Melbourne Airport and 90 per cent of Launceston Airport.

Via a 40 per cent stake in Hochtief Airport Capital (HTAC)), AIX also has a small share of Sydney, Athens, Dusseldorf and Hamburg's airports. You can throw in ports in Portland and Geelong for good measure.

Hochtief, which is fighting off a hostile bid from Spanish group ACS, is most likely a seller of its HTAC stake, which raises the prospect of AIX getting out, too.

A sale is highly desirable: as Morgan Stanley notes, AIX is trading at a 24 per cent discount to its net tangible assets of $2.54 a share (as of December 31).

HTAC accounts for 47c of NTA and ports (which could also be sold) a further 15c.

Morgan Stanley believes a sale of the HTAC stake could add 30 per cent (58c) to the share price and prompt a 40c special distribution.

Given this potential upside -- and given the underlying performance of the airports -- we maintain AIX as a long-term buy.

One potential threat is the current Productivity Commission into (monopoly) airport pricing. There'll be a queue of complainants longer than a Mascot taxi queue at 6pm on Friday.

We wouldn't hold our breath for fairer car-parking prices that aren't more expensive than many airfares. in any event MAp Group (MAP, $3.10), which owns 74 per cent of Sydney Airport, has the most to lose."