Aena: Caution facing risk/catalyst factors in short/medium term

AenaBarcelona airport, Spain

Ángel Pérez Llamazares (Renta 4) |Aena. Caution due to risk factors/ catalysts in short medium term. We raise O.P. to 150.3 euros.

We reiterate our traffic growth perspective, +2.5% yoy.

Despite the excellent performance so far this year (+5.7% yoy), we decided to reiterate our perspective of +2.5%. Doubts over the performance of British traffic, and the opening of new places in the Mediterranean, lead us to remain cautious.

Various factors identified as catalysts/risks in the short to medium term:

Finalisation of the Duty Free contract in October 2020. Its renewal or substitution supposes a risk factor (8% of income).

– New regulatory period DORA II starting in 2022. The larger investments expected (DORA I limited it to 450 million euros per year, for DORA II we do not expect limits, average expected investment of 700-900 million euros) could compensate the possible negative adjustments in the new regulation, risk relatively low. We will have to wait to know the traffic projections (depending on the outcome of Brexit), OPEX projections (efficiency level similar to now, risk of wage pressures) and the wacc (awaiting details of risk free factor). Proposal expected at the end of 2020.

– Awaiting Brexit (weight of British passengers ~18%) and its implications in European air traffic (IAG › 27% of traffic).

– Attention also to the viability of different companies, like Norwegian (4% of Aena traffic), facing doubts about their continuity; the effect of consolidation in the European airline sector; as well as the impact which the Boeing 737 case could have on the summer season.

We raise our objective price +6% but reiterate overweight.

Although we have not changed our traffic perspectives for 2019, we have slightly improved our growth to perpetuity given the good perspectives of global air traffic in the long term (X2 in 20 years) and the strong investment plans foreseen, principally in Madrid and Barcelona, which lead us to improve our objective price to 150.3 euros (compared to 141.9 euros previously). However, given the excellent performance so far this year (+19% vs + 10% IBEX) we reiterate underweight.

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