Auckland Airport: International and Domestic Passenger Numbers Are Nearing 2019 Levels

We lower our fair value estimate for Auckland International Airport by 9% to NZD 8.00 per share (AUD 7.20) after transitioning to a new analyst. The bulk of the downgrade is due to higher capital expenditure expectations. We estimate a capital expenditure bill of nearly NZD 7 billion over the five years to fiscal 2028, from less than NZD 2 billion in the last five. Auckland is investing in sizable projects—much of them multidecade investments—like a new terminal, ground transport facility, and car park extension. Despite the drag this investment is set to have on returns on invested capital in the medium term, Auckland’s wide economic moat remains intact thanks to its near-monopoly position in a stable regulatory environment. We expect returns on invested capital to exceed the weighted average cost of capital by the end of the next decade and beyond, as expansion projects come online. Shares in Auckland Airport screen slightly undervalued.