The IPO of Spanish airport group Aena represents the largest share issue floated in Europe over the past twelve months. The IPO has been postponed twice already to date, with the price for Wednesday´s offering set at €58 per share. That figure gives the company an overall valuation of €8.7 billion.
The Spanish Government is set to retain a 51% stake in the company, with private investors to compete for shares in the remaining 49%. The price being quoted per share is higher than was touted before the process went under review last year, a fact that appears to have cooled the interest of certain parties, notably Ferrovial and Alba.
Felipe Lopez, an analyst with SelfBank, believes the loss of Ferrovial from the bidding process may be something the company comes to rue in the future: “One of the worst bits of news for this IPO is Ferrovial’s decision to step out. This was one of the main reasons some investors liked Aena, as Ferrovial has a lot of experience in managing airports, especially outside Spain. And we think that future revenues could come from managing other international airports, especially in Latin America, as Aena has already hoarded the Spanish market. The withdrawal of Ferrovial is definitely a downside,” he said.
Mr Lopez believes that the price being quoted to the market is a positive sign about prospective demand, yet notes that external factors will likely play a role in how the shares perform in the short- term: “The fact that they have chosen €58 as the share price means that there has been great interest for the company on the roadshow, so it is likely that shares will follow an upward trend. One of the main factors that may affect the trend in the coming days will be the performance of the whole market, as there are important dates on the schedule regarding Greece’s debt negotiation, which is the main concern for European markets at the moment,” he added.
Yet the fundamentals supporting the company make it an attractive proposition in Mr Lopez’s eyes: “Aena is a profitable company, with a positive Ebitda. It is easier to value these kinds of businesses rather than companies from other sectors, like technological entities. This type of business has very strong entry barriers, with almost zero competitors in Spain”.
With the dollar performing so strongly against the euro at present, interest may well come from across the Atlantic: “It would not surprise me to see the entrance of a non-euro company/investment fund, attracted by the euro depreciation in the past few months,” Mr Lopez said.
“A price of €58 per share means a 2013 P/E of 14.58x is better than similar companies like Fraport (22,6x) or Aeroports de Paris (26,7x). However, Aena’s debt to Ebitda ratio is quite high: 7x. Another negative element is the 51% stake the government will hold.”
Javier Flores, analyst at Asinver feels the initial price being quoted for the company is not an accurate reflection on Aena´s true value. “The price is based on an assessment carried out in 2013 and does not represent the current situation of the company. The assessment was based on the ratios in equivalent European airports. But AENA also holds a number of airports which run a loss. The assessment criteria are very favourable,” he stated.
Mr Flores believes that the share price will undergo a correction in the not too distant future: “After a few months, there will likely be a reduction of 15-20% in the valuation of the company, which will be a more balanced assessment.”
There may also be some difficulties in the meshing of public/private holdings: “There will be different industry standards and expectations between the public and private concerns of the business. Management will have to suffer interference around things like public safety, which is never convenient,” he added.
Mr. Lopez was in agreement on this note, adding that political uncertainty may have a destabilising effect in the future: “I think the current managers are great for the company, but the fact that the main shareholder is the Kingdom of Spain is not very good news for investors. Spain will hold elections at the end of 2015, and a hypothetical victory for Podemos- which supports the nationalization of certain sectors- or PSOE- whose spokesperson of the ‘Comisión de Fomento’ recently stated that they would study Aena if they attain power-could have a bearing on the administration of the company in the future.”