SkyParks 2 Expansion And E-Commerce Cargo Boom Will Propel Revenue And Boost Margins

Key Takeaways

• Terminal expansions and sustainability initiatives are set to boost operational capacity, driving future revenue growth and creating additional income streams.
  
• Strong financial stability from liquidity and cash flow allows for reduced financial expenses, enhancing net margins without debt financing needs.
  
• Rising costs, future revenue uncertainty, and geopolitical tensions threaten profitability, while competitive pressures demand continuous pricing and cost management.

Catalysts

Engages in the construction and operation of civil airports and related facilities in Austria and Malta.

• The company's terminal expansion projects, including new facilities such as SkyParks 2 in Malta and ongoing sustainability initiatives like the photovoltaic plant, are expected to enhance operational capacity and efficiency, which is likely to drive future revenue growth.
  
• The anticipated opening of new infrastructure like the South extension and hotels at AirportCity, along with increased occupancy of office spaces by 2025, should create additional income streams, positively impacting future earnings.
  
• With no need for debt financing in the upcoming years due to available liquidity and improved cash flow, the financial stability of the company can result in better net margins by reducing financial expenses.
  
• The continued growth in passenger numbers, despite geopolitical challenges, especially in Malta, along with strong cargo development driven by Chinese e-commerce, indicates potential for increased future revenue.
  
• The company's ability to maintain or increase airport charges, combined with strategic incentives aimed at airlines, provides a buffer for revenue stabilization or growth, although it might face challenges due to fluctuating inflation and airline pressures.

Flughafen Wien Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Flughafen Wien's revenue will grow by 4.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 19.2% today to 19.3% in 3 years time.
• Analysts expect earnings to reach €225.1 million (and earnings per share of €2.68) by about December 2027, up from €198.3 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €197.8 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.3x on those 2027 earnings, up from 22.5x today. This future PE is greater than the current PE for the GB Infrastructure industry at 9.7x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.14%, as per the Simply Wall St company report.

Flughafen Wien Future Earnings Per Share Growth

Risks

• Rising personnel and maintenance costs are a concern, as they have already increased significantly, which could compress net margins and profitability.
  
• The increase in airport charges is only set to provide temporary relief as they are expected to decrease again by January 2026, which could impact future revenue growth.
  
• There is uncertainty around future passenger growth due to geopolitical tensions and economic stagnation in the EU, particularly impacting revenue and the ability to surpass 2019 figures consistently.
  
• Aircraft delivery delays, such as those affecting Austrian Airlines, could limit traffic growth and capacity expansion, thereby impacting revenue potential and operating performance.
  
• The competitive pressure on handling and security services requires constant pricing adjustments and cost management, posing a risk to net earnings if not meticulously managed.

Valuation

• The analysts have a consensus price target of €60.3 for Flughafen Wien based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be €1.2 billion, earnings will come to €225.1 million, and it would be trading on a PE ratio of 27.3x, assuming you use a discount rate of 7.1%.
• Given the current share price of €53.2, the analyst's price target of €60.3 is 11.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.