Here are some numbers/analysis for you MD - from Huntleys
EPS dilutive but CF positive (given impact of depn)
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-Auckland Airport announced yesterday that it was acquiring a 24.55% stake in North Queensland Airports (NQA) which owns the Cairns and Macay Airports in Queensland. AIA will pay A$133m (NZ$166m) which will be initially funded by debt with longer term funding mix involving a mixture of debt and equity
-Management does not expect the acquisition to have any material impact on dividend distribution. It however expects to have a dilutive impact on EPS on account of higher funding and depreciation cost.
-Key investors besides AIA in NQA are JP Morgan (49.9%), Hastings managed infrastructure fund (20.12%) and Perron Investments (5.43%). NQA has a gearing of approximately 43%.
-IRR of mid-teen percentages is expected from the deal over the long term. The purchase price including assumed debt works out to an EBITDA multiple of 18.8 times FY09 earnings. The purchase price is slightly above the price paid to the Queensland state government late in 2008.
-The acquisition gives AIA an exposure to the fast growing tourism market in Cairns which is expected to benefit from the rapidly growing Asian market. Great Barrier Reef and West Tropic Rainforests are the main attractions here. Australia has set itself a goal of lifting growth from Asian visitors by 7% p.a. from 2009-2014. This is approximately 2x the growth rate that NZ is hoping to achieve.
-Cairns Airport roughly makes up 75% of the purchase price. It is the seventh busiest airport in Australia with 680,000 international and 3m domestic passengers. Overall passenger numbers since 2003 have grown at 3.1% p.a. supported by solid growth in domestic passengers. International passenger numbers have declined due to a reduction in Japanese tourists.
-The Mackay Airport is a domestic airport and represents 25% of the purchase price. Passenger volumes have more than doubled since 2002 to 946,000 in 2009 benefiting from strong resources demand. Bowen Basin, one of the largest coal mining regions of the world is supporting growth.
-NQA is expected to generate good free cash flows as future capital expenditure requirements are minimal and probably in line with depreciation. NQA’s revenue is 100% unregulated.
-Management expects synergies stemming from air service development and tourism marketing to lift annual passenger numbers at the Auckland Airport by 100,000 within the next 5 years. This should deliver incremental EBITDA of NZ$2-2.3m p.a.